First they were colleagues on a trading floor in New York. Then they were friends running a start-up together in Hong Kong. Eventually they became partners in a turbulent office romance chronicled in tabloid headlines around the world.
On Tuesday, in a packed Manhattan courtroom, the relationship between Sam Bankman-Fried and Caroline Ellison took another turn. The two faced each other for the first time since the cryptocurrency trading companies they built together, FTX and Alameda Research, collapsed in November.
Ms. Ellison, 28, took the stand for about four hours on the fifth day of Mr. Bankman-Fried’s fraud trial in federal court. She began by taking more than 10 seconds to identify Mr. Bankman-Fried when a prosecutor asked her to point him out.
Then within the first 15 minutes of her testimony, Ms. Ellison repeatedly blamed Mr. Bankman-Fried, 31, for crimes that led to FTX’s implosion. She testified that he instructed her to use FTX customer deposits to finance venture investments and loan repayments by Alameda Research, a crypto hedge fund that she oversaw for him. She said Alameda took around $14 billion, only some of which it was able to repay.
“He directed me to commit these crimes,” Ms. Ellison said, as Mr. Bankman-Fried sat across the room flanked by his lawyers.
As the government’s star witness — and by far Mr. Bankman-Fried’s most widely discussed associate — Ms. Ellison is a key figure in the trial, and her testimony was a highly anticipated moment.
She is regarded as a chief accomplice to Mr. Bankman-Fried, who became a symbol of hubris and dangerous risk taking across the cryptocurrency industry after he was charged last year with masterminding a sweeping conspiracy to steal billions of dollars in deposits from FTX’s customers. Her romantic relationship with Mr. Bankman-Fried, whom she dated on and off, gave her unique access to the FTX founder as he built his crypto empire.
In December, Ms. Ellison pleaded guilty to fraud and conspiracy. She joined two other former FTX executives — Gary Wang and Nishad Singh — in agreeing to cooperate with the prosecutors pursuing Mr. Bankman-Fried. A fourth former top executive, Ryan Salame, also pleaded guilty but is not cooperating with the authorities.
Mr. Bankman-Fried has pleaded not guilty. He could receive what would amount to a life sentence if convicted.
As the criminal investigation unfolded over the past year, Mr. Bankman-Fried turned Ms. Ellison into an important element of his defense. He has argued that she ignored his instructions and made mistakes in managing Alameda that contributed to FTX’s failure.
A few weeks before the trial, Mr. Bankman-Fried had his bail revoked and was sent to jail after a judge ruled that he had tried to intimidate Ms. Ellison by leaking her private writings to The New York Times.
In her testimony on Tuesday, Ms. Ellison explained her history with Mr. Bankman-Fried and delved into the details of their relationship, often in highly personal terms.
Ms. Ellison and Mr. Bankman-Fried met more than five years ago at Jane Street, a New York trading firm where Mr. Bankman-Fried worked briefly after college. They bonded over a shared commitment to effective altruism, a philanthropic movement popular in tech circles, and eventually became romantically involved.
In 2018, Ms. Ellison joined Mr. Bankman-Fried at Alameda, where she worked as a trader and was then promoted to chief executive. That fall, she testified, they “started sleeping together on and off.”
Shortly after starting at Alameda, Ms. Ellison said, she realized the company “was in much worse shape” than Mr. Bankman-Fried had conveyed to her. The firm had suffered large losses and was desperate for new sources of capital, she said.
She said Mr. Bankman-Fried was “very ambitious,” telling her that he wanted his companies to be successful and that there was “a 5 percent chance” that he would become president of the United States.
He had an unusual approach to risk, she added. At one point, she testified, Mr. Bankman-Fried said he would happily perform a coin flip if heads meant the world would become “twice as good,” even if tails meant the world would be destroyed.
Ms. Ellison eventually moved with Mr. Bankman-Fried from Alameda’s original headquarters in the San Francisco Bay Area to Hong Kong, and then later to the Bahamas, where FTX and Alameda were based when they imploded.
Mr. Bankman-Fried and Ms. Ellison lived together in a luxurious penthouse on the Bahamian island of New Providence, along with eight other friends and executives, including Mr. Wang and Mr. Singh.
When prosecutors questioned Ms. Ellison about her relationship with Mr. Bankman-Fried, Ms. Ellison’s voice became softer. She said that she had little power in the relationship, and that Mr. Bankman-Fried didn’t want other people to know they were dating.
“He was the person I reported to,” she said. “He owned the company, and he set my compensation and had the ability to fire me.”
Ms. Ellison said dating “created some awkward situations” because Mr. Bankman-Fried was her boss. She said she ultimately broke up with him because “he often felt distant” or “wasn’t paying attention to me.”
Alameda had dipped into FTX’s customer funds for years, Ms. Ellison said. At a meeting in Hong Kong in 2021, she said, Mr. Bankman-Fried authorized the use of FTX customer deposits to buy back about $2 billion in shares of the exchange that were owned by the rival crypto company Binance.
“We have to get it done,” she recalled him saying.
Ms. Ellison also recounted several times that she questioned the use of FTX customer funds to pay lenders or make investments, only for Mr. Bankman-Fried to reassure her that it was the right move.
“As a trader, I was a customer on exchanges and if I knew this was happening at another exchange I would be uncomfortable leaving money there,” she said.
Prosecutors walked Ms. Ellison through several spreadsheets she had prepared and shared with Mr. Bankman-Fried, in which she predicted Alameda would struggle to pay back its lenders if the market crashed.
Ms. Ellison also testified that she was troubled with some of the ways FTX and Alameda treated FTT, a digital coin that was created by Mr. Bankman-Fried.
Mr. Bankman-Fried was intent on ensuring that FTT maintained a certain value on the market, Ms. Ellison testified. That was because of its role in Alameda’s business, she said. The hedge fund offered FTT as collateral for loans, essentially allowing the firm to exchange an invented currency for other assets. To stop FTT’s value from falling, Mr. Bankman-Fried directed Alameda to buy large quantities periodically, Ms. Ellison said.
Mr. Bankman-Fried wanted to keep those efforts secret, Ms. Ellison said, and scolded her when she discussed Alameda’s FTT strategy openly in the office.
Ms. Ellison said she was uncomfortable using FTT to obtain loans because its value was largely imaginary — if it were sold in large quantities, it could quickly become worthless.
But, she explained, “Sam directed me to do it.”
Ms. Ellison is set to take the stand again on Wednesday.
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