Day 5 of Sam Bankman-Fried’s Trial: Caroline Ellison Set to Testify

The trial surrounding FTX founder, Sam Bankman-Fried, is set to reconvene on its fifth day, October 10th. All eyes will be on Caroline Ellison, Bankman-Fried’s former romantic partner and ex-colleague, as she steps into the spotlight to provide critical testimony.

The six-week-long trial is expected to shed light on the alleged mishandling of funds at Alameda Research, an affiliate of FTX. Reports suggest that Alameda misappropriated $8 billion from FTX’s customer funds for personal use.

In December, Ellison and Gary Wang, the former CTO of FTX, admitted their guilt. Since their confessions, both have been collaborating with the Manhattan U.S. attorney’s office.

It is anticipated that Ellison will provide insights into the alleged malpractices between 2019 to 2022. Accusations revolve around FTX allowing Alameda to secure billion-dollar loans without collateral. The purported agreement enabled Alameda to borrow without constraints, exempting it from negative balances and margin calls based on FTX’s liquidation procedures.

Previous admissions by Ellison include claims of colluding with Bankman-Fried to manipulate financial records to conceal the borrowing activities shared between Alameda and FTX executives.

Bankman-Fried, now 31 years old, is contesting seven federal allegations, encompassing fraud and money laundering. In January, he maintained his innocence by entering a plea of not guilty.

The upcoming testimony by Ellison follows the recent revelations provided by Wang on the trial’s fourth day. A brief recap of Wang’s testimony from day 4 includes:

• Alameda possessed special “Allow Negative” permissions on the FTX platform.
• Such privileges enabled Alameda to trade beyond its account limits.
• Alameda boasted a significant credit line, providing it with quicker trading capabilities.
• The company extracted $8 billion, funds believed to be sourced from FTX client deposits.
• At the behest of Bankman-Fried (often referred to as SBF), Nishad and Wang reportedly developed a ‘backdoor code’ in July 2019, shortly after FTX’s inception.
• Alameda operated an additional account with FTX under the alias – Cottonwood Trading.
• In 2020, Alameda’s debt surpassed FTX’s total earnings.
• Alameda’s credit cap stood at a staggering $65 billion, while no other client with FTX had credit exceeding $1 billion.
• SBF allegedly directed Alameda to settle debts with Genesis using FTX client deposits.