Who is Caroline Ellison, the trader at the center of the FTX collapse?


For four years, Caroline Ellison and Sam Bankman-Fried have worked together to build a crypto empire. Ellison ran a hedge fund associated with the FTX cryptocurrency exchange Bankman-Fried, which was founded in 2019.

Besides work, the couple had a lot in common. both were the children of accomplished academics, studied mathematics at prestigious universities, and preached the importance of giving money to make the world a better place. The two lived with partners in a luxury penthouse in the Bahamas and were sometimes reported to be romantically involved.

Now, however, Ellison has largely parted ways with Bankman-Fried; he is cooperating with federal prosecutors who accuse him of masterminding one of the largest financial frauds in US history.

Ellison, 28, pleaded guilty last month to charges that alleged he, Bankman-Fried and other FTX executives conspired to steal their clients’ money to invest in other companies, make political donations and buy expensive real estate. for. 110 years imprisonment. On December 19 Upon hearing, Ellison apologized to FTX’s customers and investors, saying he knew what he did was wrong.

Bankman-Fried, 30, will next appear in court on Jan. 3, when she will likely plead not guilty, said a person familiar with the case, who spoke on condition of anonymity to discuss private information. In multiple interviews before his arrest on December 12, he insisted he was only guilty of mismanagement and had not knowingly defrauded anyone.

Former FTX chief technology officer Gary Wang, 29, also pleaded guilty. Attorneys for Ellison and Wang did not respond to requests for comment. Bankman-Fried spokesman Mark Botnick declined to comment.

Ellison’s settlement with the government could be bad news for Bankman-Fried. The fact that she and Wang quickly pleaded guilty and signed the agreements suggests they will testify against Bankman-Fried in court, said Neama Rahmani, a Los Angeles-based trial attorney and former federal prosecutor. “They are fully cooperative,” he said.

If Ellison provides significant assistance to prosecutors, the government will ask the judge to take that into account when he is ultimately sentenced. Defendants often agree to testify against their alleged co-conspirators to reduce their sentences. If Ellison helps the government, Rahmani estimates her sentence could be up to five years, compared to Bankman-Fried’s possible 10 to 20 years in prison, he said.

Post Reports podcast. The decline of FTX

Ellison’s rise to become one of the most important figures in the crypto world has been swift. In a July 2020 interview on FTX’s internal podcast, he described his childhood, education and rapid-fire tour of Wall Street before landing at Alameda Research, a Bankman-Fried-owned hedge fund closely integrated with FTX.

While Bankman-Fried’s parents are law professors at Stanford, Ellison’s mother and father are professors of economics at the Massachusetts Institute of Technology. His father, who wrote math textbooks for children, got him into math at a young age. He also read a lot when he was just 5 years old, talking about a thick Harry Potter book because he couldn’t wait for his parents to read it to him, he said.

Her father encouraged her and her sisters to compete in math competitions, which she continued through middle and high school before studying math at Stanford in 2012. Boston,” he said.

Unsure of what to do with her degree, she applied for an internship her junior year at quantitative trading firms that use complex math and algorithms to predict market movements.

Allison did two internships at Jane Street Capital, a large quantitative trading firm, and got a job offer after college, she said. It was there that he met Bankman-Fried, who had been working in the firm’s New York office for several years. In 2017, he quit his job and moved to the Bay Area, where Alison asked him out a year later. “He canceled a few times, then finally said yes,” she said.

Bankman-Fried told him about the cryptocurrency trading firm he had recently founded, Alameda Research. He soon left Jane Street to join her. “It seemed like too great an opportunity to pass up,” he said.

Crypto is a house of cards.

In a Tumblr blog linked to his Twitter account, Ellison said he didn’t get into crypto as a “true believer.” “It’s mostly scams and memes when you get down to it,” reads the post on an archived version of Tumblr. But he saw value in the core technology behind crypto, which allows transactions without bank or government intervention.

“If authoritarian governments pose a serious threat to a civilization that doesn’t seem completely insane, it might end up being important,” reads the rest of the post, dated March 24, 2022.

At FTX, however, Ellison’s job wasn’t so much to avoid authoritarian governments, but more to cash in on the explosion of interest and investment in cryptocurrencies. The company was one of the biggest winners of the crypto boom of 2020 to 2021, when ordinary people around the world invested in bitcoin, ethereum and a number of other tokens. The global market has reached an estimated $3 trillion, about the same as the United Kingdom’s gross domestic product.

FTX quickly grew as one of the main places where people could buy, sell and trade cryptocurrencies. His commercials have featured sports stars like Tom Brady and Stephen Curry, and he paid millions for the naming rights to the Miami Heat basketball team’s stadium. Many users invested on margin, that is, they made financial bets with borrowed money from the stock exchange, hoping that their investments would pay off. By the end of 2021, FTX was trading around $350 million in crypto per day, making money by taking a percentage of each transaction.

Alameda was technically separate from FTX, investing and trading with the goal of making money like any other hedge fund. But it has also played a key role as a market maker on the FTX exchange itself, enabling the buying and selling of tokens and other digital assets. in large volumes to increase liquidity in the stock exchange and make it more attractive to customers.

In interviews, Alison has spoken about the challenges and excitement of the job.

“There are a lot of people who are very smart but not necessarily good in the very messy world of trading, especially in crypto trading,” he said on the El Momento crypto podcast posted on May 25, 2022. “You’ll never have them all. the information. So you just have to make your best guess based on what you see.”

He rose through the ranks at the company, and Bankman-Fried made it CEO in 2021, along with Sam Trabucco. In August 2022, Trabucco stepped down and Ellison became the sole head of Alameda. (Trabucco did not respond to a request for comment, and his whereabouts are unknown.) In a January 2021 podcast, Ellison described how he ran the trade, and Bankman-Fried’s involvement ceased over time.

The job was extremely lucrative. At its peak, FTX was valued at $32 billion by its venture capital investors, giving Bankman-Fried a net worth of $26 billion in spring 2022, according to the Bloomberg Billionaires Index. Bankman-Fried, Ellison and a group of their colleagues lived in a luxury penthouse worth 40 million dollars in Nassau, Bahamas. The employees were romantically involved, and Bankman-Fried and Ellison occasionally dated, according to a report by crypto news site CoinDesk. Stimulants were part of the lifestyle.

“Nothing like habitual amphetamine use can make you appreciate how stupid the normal, non-drug human experience is,” Ellison. on Twitter last year.

Like Bankman-Fried, Ellison was an advocate of effective altruism, a philanthropic philosophy that encourages bright young people to take high-paying jobs, accumulate wealth, and give it away. He had found the movement while at Stanford, surrounded by similarly intelligent and soon-to-be-rich people.

“The ultimate goal, or one of my most important goals, I think, is to maximize my impact,” he said in a July 2020 podcast interview. “Working in Alameda is kind of good for that for a couple of reasons. In other words, the only thing is to make money.”

Bankman-Fried himself promised to give his billions to the movement. In an interview published on January 21, 2021, also with the in-house FTX podcast, Alison again talked about how he saw value in the work he did.

“It’s definitely stressful at times, but it gives me a sense of purpose and meaning to feel like I’m needed or to feel that what I’m doing is valuable,” Allison said.

“Secret winter” has arrived. And it looks like an ice age.

Behind the scenes, however, FTX was allegedly breaking the law, according to federal prosecutors. The company took customer deposits and loaned them to Alameda, which used the money to make risky trades, invest in other companies, and donate to politicians and effective altruism groups.

Alameda had special access and privileges on the FTX exchange that corporate clients did not have, essentially allowing it to borrow freely without having to pay back the loans or face the same consequences if it lost money on a trade with borrowed funds; Ellison was aware as early as 2019, he testified earlier this month.

In November, Bankman-Fried told the New York Times’ DealBook conference that he never knowingly mixed funds between Alameda and FTX, and that he was surprised by the extent of Alameda’s exposure to the FTX exchange.

“Obviously I made a lot of mistakes. There are things I would give anything to do again. I have never tried to defraud anyone,” he said.

Alameda borrowed huge sums of money from crypto-lenders to fund Bankman-Fried’s investments and donations, but as the price of crypto-assets plummeted by 2022, those lenders demanded their money back. Ellison and his partners paid for it with the client’s money, he said, something the platform’s users didn’t know was happening.

And when investors asked questions, he, Bankman-Fried and other partners agreed to lie, concealing the company’s true financial condition and special arrangements for Alameda to freely use clients’ assets, Ellison told the judge.

“I colluded with Mr. Bankman-Fried and others to provide materially misleading financial statements to lenders in Alameda,” he said. “I’m really sorry for what I did. I knew it was wrong.’

The judge asked if he also knew it was illegal.

Dalton Bennett and Nitasha Tiku contributed to this report.

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