It follows testimony from two other banker-turned-trustees and top lieutenants who told jurors last week that the executive orchestrated a massive fraud against clients of his crypto trading platform FTX. Bankman-Fried’s college friend Adam Yedidia, who joined FTX as a software developer, said he resigned because the conduct was up in the air as the company unraveled. Gary Wang, who pleaded guilty to financial crimes as FTX’s chief technology officer, testified that Bankman-Fried stole $8 billion from customers and publicly lied about it.
Ellison pleaded guilty in December to seven charges, including wire fraud and securities fraud, and agreed to cooperate with prosecutors in hopes of receiving a lighter sentence. He said prosecutors participated in a scheme central to the case by using funds from FTX clients to pay off the debt of his hedge fund, Alameda Research.
“I am truly sorry for what I did,” Ellison said as he entered his guilty plea in December in Manhattan federal court. “I know it’s wrong.”
Bankman-Fried faces sweeping allegations that she unwittingly siphoned billions of dollars in FTX client funds to make risky investments, buy luxury real estate, extend huge loans to her inner circle, and donate tens of millions of dollars to politicians in both parties.
If convicted, he could face decades in prison. He is innocent.
Prosecutors argue that Ellison played a key role in Bankman-Fried’s crimes. Assistant U.S. Attorney Nathan Rehn, who delivered the government’s opening statement last week, said Bankman-Fried established her as a “front” over Alameda.
Defense lawyers presented a different version of events. They hold Ellison partly responsible for the explosion of crypto companies by failing to heed Bankman-Fried’s warning to position Alameda for a potential drop in the price of crypto assets.
As a witness, the Stanford-educated mathematician brings a mix of personal and professional insight to Bankman-Fried’s behavior, said former federal prosecutor Adam Kamenstein.
“She’s going to establish that not only is Sam functionally aware of what’s going on, but he’s lying about it,” Kamenstein said. “It’s game over.”
Bankman-Fried and Ellison first met while working at Jane Street Capital, a private equity firm in New York City. Bankman-Fried left Alameda in 2017 and hired Ellison to join her the following year. He was promoted to co-chief executive of the company in 2021 and, since then, sole CEO, he has continued to own the majority of the fund.
But Ellison had deep doubts about his abilities as a leader—anxieties fueled by his on-again, off-again love affair with Bankman-Fried, and later Bankman-Fried, according to private writings. leaked For the New York Times. That leak prompted Judge Louis A. Kaplan led to Bankman-Fried’s bail being revoked, allowing her to live under house arrest at her parents’ home in Palo Alto, Calif. He was incarcerated from a Brooklyn jail.
In his plea appearance, Ellison said he knew Alameda FTX had “backdoor” access to customer funds since 2019, effectively giving the company “an unlimited line of credit without the need to post money.”
He also discussed several of Alameda’s larger, riskier challenges in venture deals and personal loans for FTX executives, saying it had taken out loans from outside lenders “worth billions of dollars.” When those borrowers got their money back, Bankman-Fried and her team tapped FTX to repay customer funds, she said.
Ellison said he worked with Bankman-Fried and others to lie to Alameda’s creditors about its viability, including by doctoring certain financial statements. At Bankman-Fried’s direction, he secretly worked to inflate the market price of FTT — which was issued by FTX and used by Alameda to shore up its balance sheet — to improve the appearance of the company’s financial health to those lenders, prosecutors say.
Throughout his time there, Ellison kept detailed records of the state of the business and the efforts of Bankman-Fried and his closest advisers, as the company began to deteriorate in 2022 amid a broader industry downturn.
“He took notes on meetings with his co-conspirators in which they discussed Alameda’s financial health and its liabilities to FTX,” prosecutors wrote in an August court filing outlining the evidence they plan to use at trial. His posts included a list of “Things Sam is Freaking Out About,” titled Alameda’s trading positions, problems between FTX and Alameda, and misinformation about fundraising.
Ellison would provide a window into the business’s dizzying decline in early November last year. As FTX faced a credit crunch and customers tried to pull their deposits, Ellison Alameda gathered staff for a tearful presentation in an effort to explore a short-term bid for rival exchange Binance. Solicitors.
Alameda “borrowed some funds from FTX” to repay his creditors, he said. “I think, mostly I want to say, I’m sorry. It’s really disgusting.”
Asked by an employee who called to pick up an FTX customer’s money, she said, “Um… Sam, I guess.”