Crypto exchange FTX engaged in international bribery hired Thai prostitutes, and tried to raise funds from Saudi Crown Prince Mohammed bin Salman, according to explosive testimony Wednesday from Caroline Ellison, a key witness.
Ellison, the former CEO of Alameda Research and the government’s star witness in the case against FTX founder Sam Bankman-Fried pivoted in her second day of testimony to the extraordinary measures FTX took under his leadership. They include attempts to unfreeze billions of dollars worth of funds Chinese officials seized on exchanges in that country in early 2021 when FTX was being investigated for money laundering.
Caroline Ellison, former CEO of Alameda Research founded by Sam Bankman-Fried, exits Manhattan federal court after testifying on Tuesday, in New York. Eduardo Munoz Alvarez/Associated Press
Bankman-Fried and Ellison attempted to trade the funds off frozen accounts using the identities of Thai prostitutes, which were provided by another top executive, Ryan Salame, Ellison said. When that didn’t work, they sent a $150 million bribe to Chinese government officials in November 2021, which ultimately unfroze the funds, according to Ellison.
In a document shown to the courtroom that Ellison created, titled “Notable/idiosyncratic pnl stuff,” she had categorized the bribe as “-150 m (dollars) from the thing?”
“I wanted to be careful about what I wrote down,” Ellison told the judge. “I thought it could be later used in a court case.”
Judge Lewis A. Kaplan made clear to the jury, however, that bribery is not among the crimes that Bankman-Fried has been charged with. The former crypto mogul is instead facing both criminal and civil charges that he stole billions of dollars from customers and investors.
Another bombshell from Ellison: In the months before FTX’s bankruptcy last November, Bankman-Fried traveled to the Middle East to meet with Mohammed, the Saudi crown prince, to raise money to cover Alameda’s loans and investments. She had referred to that effort in another document, which she had titled “things Sam is freaking out about,” under “raising from MBS.”
Bankman-Fried was also fixated on using U.S. regulators to gain a competitive advantage for FTX, according to Ellison. In another document, she had written about “getting regulators to crack down on Binance,” referring to the rival crypto exchange. As she recounted Wednesday, Bankman-Fried said that U.S. regulators had promised him they would enforce regulation against Binance, which he thought would increase FTX’s market share.
Ellison also recalled how, in August 2022, Bankman-Fried yelled at her for not hedging Alameda’s investments, which caused her to cry. But at the time, she thought it was the risky loans, and not the risky investments, that would lead to Alameda’s demise, she said.
Defense attorneys, meanwhile, are awaiting their opportunity to question Ellison during cross-examination later on Wednesday. They had signaled in the criminal trial’s early rounds that they intend to pin the blame for the crypto empire’s collapse in part on Ellison, who they have said did not adequately position the firm for a broader downturn in the crypto industry.
Ellison began testifying on Tuesday when she told jurors that even as she nominally became the sole chief executive of Alameda Research, Bankman-Fried continued to call the shots behind the scenes. She said the financial crimes he directed her to commit included using customer money from FTX to make risky investments in start-ups and pay back massive loans.
She described his appetite for risk in vivid terms. She said Bankman-Fried “would be happy to flip a coin, if it came up tails and the world was destroyed, as long as if it came up heads the world would be, like, more than twice as good.”
Prosecutors in their ongoing questioning are likely to ask Ellison to take jurors inside the chaotic final days of Bankman-Fried’s crypto empire as it collapsed last November. Two days before FTX filed for bankruptcy, Ellison convened her team at Alameda and tearfully confessed that the hedge fund had pilfered customer funds to pay its bills. “This really sucks,” she told Alameda employees, according to a recording of the meeting that prosecutors obtained.
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