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Caroline Ellison’s Testimony Puts FTX Founder on the Hot Seat
Introduction
In a dramatic turn of events at the federal courthouse in lower Manhattan, Caroline Ellison, former girlfriend and colleague of Sam Bankman-Fried, made her grand entrance, setting the stage for her much-anticipated testimony against the embattled founder of the now-defunct FTX cryptocurrency exchange. This pivotal moment unfolded on the fifth day of the trial, where Bankman-Fried faces charges of embezzling billions of dollars in FTX customer deposits.
The Cross-Examination: Christian Everdell Grills Gary Wang
The day commenced with defense lawyer Christian Everdell’s relentless cross-examination of Gary Wang, who once served as the technology chief of the cryptocurrency exchange. Everdell delved into a significant memo circulated by Bankman-Fried in September 2022, pondering the fate of Alameda Research, the hedge fund co-owned by Bankman-Fried and Wang, which was under Ellison’s management. Bankman-Fried termed Alameda’s failure to hedge its bets a “mistake” in the memo.
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During the cross-examination, Wang confirmed that Ellison was indeed the CEO of Alameda at the time the decision not to hedge was made. This revelation held critical implications as prosecutors had announced their intention to call Ellison as a witness once Wang concluded his testimony.
Caroline Ellison’s Star Witness Role
Donating a blue baseball cap and sunglasses while clutching a blue thermos, Caroline Ellison entered the courthouse on this fateful Tuesday morning. Her appearance marked a pivotal moment in the trial, as she is expected to be the star witness. Her testimony promises to provide insight into Alameda’s business practices and her relationship with the 31-year-old former billionaire. Bankman-Fried’s defense team will likely employ cross-examination tactics to challenge her credibility.
Notably, during the summer, Bankman-Fried shared personal writings by Ellison with a New York Times reporter, revealing her struggles with work-related stress and the emotional aftermath of her breakup with Bankman-Fried. U.S. District Judge Lewis Kaplan deemed this act potentially witness tampering, leading to Bankman-Fried’s bail revocation on August 11.
Bankman-Fried’s Detention
Bankman-Fried is detained at Brooklyn’s Metropolitan Detention Center throughout the trial, which could span up to six weeks. Federal prosecutors assert that he misappropriated FTX customer funds for his crypto-focused hedge fund, Alameda, and used them for real estate investments and political donations exceeding $100 million, aiming to bolster his influence in Washington, D.C.
Guilty Pleas and Upcoming Testimony
Gary Wang and Caroline Ellison entered guilty pleas in December 2022 as part of a cooperation agreement with the U.S. Attorney’s office in Manhattan. Another key figure in Bankman-Fried’s inner circle, former FTX engineering chief Nishad Singh, is slated to testify during the trial.
Wang’s testimony last week unveiled that Bankman-Fried was aware of FTX’s dire financial situation in November 2022, contradicting Bankman-Fried’s public reassurance in a tweet that FTX’s assets were secure.
Bankman-Fried’s Defense Strategy
Sam Bankman-Fried maintains his plea of not guilty. During opening statements, his legal team acknowledged lapses in critical business operations like risk management as FTX rapidly expanded. They argued that Bankman-Fried had no intention to embezzle funds and urged jurors to question whether cooperating witnesses like Wang and Ellison were spinning old decisions in a new, nefarious light.
Under cross-examination, Wang admitted that Alameda’s special privileges on FTX were intended to support the exchange’s liquidity and growth, aligning with the defense’s assertion that Bankman-Fried made well-intentioned decisions that unfortunately backfired.
In this high-stakes trial, the spotlight is firmly fixed on Caroline Ellison’s testimony, as it promises to provide a critical perspective on the complex web of financial dealings and personal relationships that underpin this crypto courtroom drama.
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