Disgraced crypto wunderkind Sam Bankman-Fried was the mastermind behind a scheme to defraud FTX clients of billions of dollars, the star witness in his US trial testified on Tuesday.
Caroline Ellison, Bankman-Fried’s former business partner and girlfriend, said that they had stolen “around $14 billion” from clients of the cryptocurrency exchange platform before it collapsed into bankruptcy late last year.
The 31-year-old Bankman-Fried, co-founder and former CEO of FTX, has been charged with seven counts of fraud, embezzlement and criminal conspiracy, and if convicted could face a de facto life sentence of more than 100 years in prison.
In November 2022, the platform imploded, unable to cope with massive withdrawal requests from customers panicked to learn that some of FTX’s funds had been committed to risky operations by Alameda Research, Bankman-Fried’s personal hedge fund.
Ellison was CEO at Alameda and has pleaded guilty to two counts of fraud charges and agreed to cooperate with the prosecution.
After taking a good ten seconds to identify Bankman-Fried in the courtroom, Ellison said he was “the owner of Alameda and he directed me to commit those crimes.”
Bankman-Fried “was the one who set up the system” that saw Alameda take the client money from FTX and use it “for investments and to pay back debts,” she said.
Bankman-Fried’s lawyers are expected to argue that their client had little handle on the inner workings of Alameda’s business and point blame at Ellison for the alleged fraud.
In the court on Tuesday, Ellison said that she and Bankman-Fried “dated for a couple years,” a connection that helped put Bankman-Fried behind bars as he awaited trial.
Bankman-Fried in August was ordered out of house arrest and jailed after prosecutors alleged the former FTX boss had leaked Ellison’s very personal diary entries to the New York Times.
The pair and other FTX executives lived in a luxury apartment complex in the Bahamas until Bankman-Fried was arrested and extradited to the United States late last year.
Zixiao “Gary” Wang, another former close associate of Bankman-Fried, on Friday described his FTX co-founder as willing to break the law and lie to enable the company and Alameda to post strong growth.