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I’ve got some shitty ex-boyfriends, but none of them made me the CEO of their sin-eater hedge fund while refusing to give me equity and bragging about how there was a 5 percent chance they’d become the President of the United States, you know? Absolutely counting my blessings after Caroline Ellison’s first day on the stand. I wonder how many of the nine women on the jury are doing the same.

Ellison was the head of Alameda Research, the aforementioned hedge fund, during the implosion of it and FTX. She’s already pleaded guilty to criminal charges stemming from one of the worst romantic relationships I’ve ever heard of, and her testimony was widely anticipated before the trial. Today, that took the form of discussing a damning spreadsheet — one she prepared for her ex and boss Sam Bankman-Fried, now the defendant in a criminal fraud trial. 

The day started off promisingly for the defense as it cross-examined Gary Wang, the chief technology officer of FTX and co-owner of both FTX and Alameda. Christian Everdell, one of Bankman-Fried’s defense attorneys, couldn’t undo the damage of last week’s code review. But he managed to shake the rust off long enough to make Wang sound less reliable, drowning the jury in confusing technicalities.

Last week Wang testified that Alameda got access to a special credit line and an option to take its balance into the negative without triggering liquidation — something he alleged other accounts at FTX didn’t get. Everdell tried to undermine this claim by talking about the spot margin program, which let users lend each other assets for margin trading. In those cases, it was possible to have a negative balance in a specific coin. It was not, however, possible for those accounts to avoid liquidation, as Wang testified Alameda could do — or to have an overall negative balance. But I’m betting the defense is hoping the jurors will throw up their hands in confusion thinking about this.

“We ultimately took about $14 billion, some of which we were not able to pay back.”

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Wang didn’t exactly help himself out, either. Apparently, what Wang said in court contradicted something he’d said in earlier interviews with the government about market making. I say “apparently” because Everdell was probably giving him his previous testimony to refresh his recollection, but Wang was insisting he didn’t remember. In any event whatever Wang was shown wasn’t submitted as evidence or shown to the court. I got the gist, though, and I bet the jury did too — probably the strongest work the defense has done so far.

But by the end of the day, that all seemed like a sideshow. Bankman-Fried had been vibrating slightly during Wang’s testimony. During Ellison’s testimony, his bouncing became more noticeable.

Ellison was hunched in on herself as she walked into the courtroom, wearing a dusty rose dress with a gray blazer over it, looking less like an executive than like a girl who’s borrowed her boyfriend’s coat because she’s cold. When the prosecution asked her to identify Bankman-Fried, she had trouble finding him and gazed around the courtroom for more than 20 seconds — apparently he was incognito with his new haircut. After she did spot him, she was asked to identify him, which she did by identifying him as wearing a suit. This got chuckles from the rest of the defense table, also all in suits. 

She listed off the crimes she’d already pleaded guilty to, and added that Bankman-Fried “directed me to commit these crimes,” Ellison said. (Fraud, conspiracy to commit fraud, and money laundering, in case you were wondering.) “We ultimately took about $14 billion, some of which we were not able to pay back.” She tilted her head down to answer the questions, then lifted her head when she’d finished her answer.

Bankman-Fried called this being “risk-neutral,” which seems like a fancy way of saying he was a gambling addict

In Ellison’s telling, Alameda was troubled from her earliest time there in 2018. “Shortly after I started, I learned the company was in worse shape than I realized,” Ellison said. Alameda had initially been funded with loans “from acquaintances,” she said, and those loans were recalled a few weeks after she arrived. (There was a staff revolt within Alameda Research, over lost millions and general financial chaos, according to Michael Lewis’s Going Infinite.) Ellison asked Bankman-Fried why he hadn’t shared the company’s shaky circumstances in the job offer. “He hadn’t known how to tell me,” she said.

Ellison was also, of course, in a more personal relationship with Bankman-Fried. (A  juror who’d been asleep for a discussion of the FTT token woke up when she started discussing it.) The two started sleeping together in the fall of 2018, on and off. At the time, she was a trader and Bankman-Fried was the CEO. They didn’t date until later — twice. Their first relationship stretched from the summer of 2020 through the summer of 2021; they agreed to keep it secret. (Some people found out, as they usually do.) The second time, from the fall of 2021 until the spring of 2022, they lived together. 

That gave Ellison an unusual view of his character. “He was very ambitious,” she said. Besides telling her about his presidential chances, he also told her that if there was a coin flip where tails destroyed the world and heads made the world twice as good, he’d flip the coin. He called this being “risk-neutral,” which seems like a fancy way of saying he was a gambling addict.

She was named co-CEO of Alameda with Sam Trabucco in 2021, while she and Bankman-Fried were broken up, and CEO in 2022. The goal, Bankman-Fried told her, was to “optically” separate Alameda Research and FTX. “The whole time we were dating, he was my boss at work,” she said. They broke up because she wanted more from the relationship; Bankman-Fried was distant and not paying enough attention to her.

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Using the effectively unlimited funds “allowed us to make profitable trades we couldn’t have made otherwise.”

Bankman-Fried didn’t grant Ellison equity, even though she asked; he told her it would be too complicated. Instead, she got a $200,000 salary, even as CEO, and bonuses twice a year, which ranged from $100,000 to $20 million.

Initially, Alameda and FTX were “very integrated,” Ellison said. They were run by the same team, from the same office. And when Alameda was scrounging for funds, Bankman-Fried told Ellison that FTX would be a good source of capital. The $65 billion line of credit Alameda Research had meant that it did not have to post collateral. There was no contract, and no written terms, she testified. It also wasn’t visible to FTX’s auditors — she’d raised the question with Bankman-Fried and he told her not to worry about it.  

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Alameda’s credit line  — which was taken in increments of $100,000 to $10 million at a time — was used for trading. Using the effectively unlimited funds “allowed us to make profitable trades we couldn’t have made otherwise,” Ellison testified.

Customer funds were also used when Bankman-Fried bought back FTX shares from Binance, an early investor, in the summer of 2021. Bankman-Fried told Ellison it was “really important,” otherwise “Binance would do things to mess with FTX.” Ellison says she told him Alameda didn’t have the money. So Bankman-Fried took $1 billion of FTX customer funds to buy out Binance, the first time Ellison recalled an amount that large. It was Bankman-Fried’s decision, she said, as he was the CEO of FTX.

FTT was one of several “Sam coins”

There was also the FTT token, which was created by Bankman-Fried and Wang. Alameda got its war chest — 60 percent to 70 percent of the initial supply — for free, while seed investors got FTT at 10 cents a coin, and FTT first listed at $1 a coin. Bankman-Fried felt that $1 per coin was psychologically important, Ellison said, and that he directed her to buy up FTT using Alameda if its price fell below a dollar. 

FTT was one of several “Sam coins,” a nickname for tokens which Bankman-Fried was heavily involved in and owned a lot of, either personally or through Alameda. Those coins were almost certainly worth less than the value displayed on the balance sheet, because trying to sell them all at once would crater the prices. Bankman-Fried directed her to put those coins on the balance sheets Alameda showed to lenders, even though she felt it was “somewhat misleading.”

Alameda was also getting loans from outside lenders, such as Genesis, because when FTX started, there weren’t a lot of customer funds to borrow, Ellison testified. That was the basis of the worst of her testimony — and the spreadsheet from hell.

Ellison said she’d prepared the spreadsheet at Bankman-Fried’s request in the fall of 2021 and shared it with him. The point was risk analysis around paying back Alameda’s loans if they were abruptly recalled by Genesis, their lender. Bankman-Fried wanted to use $3 billion for venture investments, so Ellison was ballparking what that would do to Alameda’s risk. In the as-is scenario, if things went south, she figured there was a 30 percent chance they wouldn’t be able to meet the loan recalls. If Bankman-Fried used $3 billion to make investments, there was a 100 percent chance they couldn’t meet the recalls, even with FTX customer funds.

Echoing Bankman-Fried and Ellison’s romantic relationship, FTX was keeping cozy private ties with Alameda yet publicly holding it at arm’s length

The problem here wasn’t really the math, which seemed pretty arbitrary. It was that Ellison’s calculations assumed Alameda could borrow $1.8 billion in normal dollars and $1.5 billion in crypto from FTX. The spreadsheet makes this clear with a row labeled “FTX borrows,” which Ellison said were customer funds.

Meanwhile, echoing Bankman-Fried and Ellison’s romantic relationship, FTX was keeping cozy private ties with Alameda yet publicly holding it at arm’s length. On January 14, 2022, Bankman-Fried tweeted, “We’re launching a $2b venture fund: FTX Ventures!” Those funds came from Alameda, Ellison testified. But Bankman-Fried didn’t want to go public with the source of the funds. He said he thought Alameda’s brand was less good, and he didn’t want his name associated with it. Alameda also bought Robinhood shares for Bankman-Fried, who moved them to a vehicle called “Emergent Fidelity Technologies” to avoid association with Alameda. 

The day ended with a document that had been shared between Ellison and Bankman-Fried — with his comments appearing in bubbles along the main text. Ellison wrote she was worried about “both actual leverage and presenting on our balance sheet.” Bankman-Fried responded with a note: “Yup, and could also get worse.”

Things did, indeed, get worse.

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