HomeCryptocurrencyFTX customers deceived by Sam Bankman-Fried, according to Caroline Ellison's testimony in...

FTX customers deceived by Sam Bankman-Fried, according to Caroline Ellison’s testimony in trial.

Former CEO Testifies That Sam Bankman-Fried Directed Fraud on FTX Customers

Caroline Ellison Reveals Allegations of Fraudulent Activities by Former Crypto Mogul

Caroline Ellison, the former chief executive officer of Sam Bankman-Fried’s hedge fund, recently testified that Bankman-Fried directed her and others to defraud customers of his FTX exchange. Ellison stated that Bankman-Fried orchestrated the misappropriation of customer funds without their knowledge.

Describing her former boss as an ambitious young man, Ellison revealed that Bankman-Fried had no qualms about sharing misleading financial information with lenders. She also mentioned that he aspired to become the President of the United States one day.

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According to Ellison, Bankman-Fried’s hedge fund, Alameda Research, utilized approximately $10 billion of FTX customer funds to repay debts and make investments. The funds were acquired through a $65 billion line of credit on the exchange and from deposits made by FTX customers into an Alameda bank account when FTX lacked its own account.

“He was the one who set up these systems that allowed Alameda to take the money, and he was the one who directed us to take customer money to repay our loans,” Ellison testified.

Ellison’s testimony was highly anticipated, as she is one of three former members of Bankman-Fried’s inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the Manhattan U.S. Attorney’s office.

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Prosecutors allege that Bankman-Fried misused billions of dollars in customer funds to support Alameda, purchase real estate, and donate substantial amounts to U.S. political campaigns. The collapse of FTX in November 2022 shocked financial markets and severely damaged Bankman-Fried’s reputation.

Bankman-Fried, who has pleaded not guilty to fraud and conspiracy charges, admits to making mistakes while running FTX but denies any intent to steal funds.

In his opening statement, Bankman-Fried’s defense lawyer, Mark Cohen, urged the jury to question the motives of cooperating witnesses like Ellison, suggesting they may be distorting their original agreements with Bankman-Fried.

Gary Wang, FTX’s former technology chief, also testified, stating that Bankman-Fried falsely reassured the public via Twitter that FTX was “fine” during a period of increased withdrawal demands. Another cooperating witness, former FTX engineering chief Nishad Singh, is expected to testify during the trial.

Bankman-Fried’s Ambitions and Influence

Ellison shared that she met Bankman-Fried while both were working at Jane Street, a Wall Street trading firm. When Bankman-Fried left to establish Alameda in 2017, Ellison joined him as a trader.

Describing Bankman-Fried as highly ambitious, Ellison revealed that he saw political donations as a means to accumulate power inexpensively. Bankman-Fried even believed there was a 5% chance of becoming the President of the United States himself.

“He said he thought it was very effective that you could get very high returns in terms of influence by spending relatively small amounts of money,” Ellison disclosed. She added that Bankman-Fried had donated $10 million to President Joe Biden’s campaign.

In an attempt to shift some blame onto Ellison for the collapse of FTX and Alameda, Cohen argued that Bankman-Fried had instructed her to hedge Alameda’s bets, which she allegedly failed to do.

However, Ellison countered this argument by stating that she always consulted Bankman-Fried on significant decisions and deferred to him. She emphasized that Bankman-Fried was her official superior, as he owned the company and had control over her compensation and employment status.

While Bankman-Fried has maintained a public presence since his arrest in December 2022, Ellison has remained relatively low-key following her guilty plea during the same month. Her private writings, shared by Bankman-Fried with a New York Times reporter, led to his bail being revoked due to potential witness tampering.

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