Sam Bankman-Fried’s lawyers prepare to question star witness

New York CNN  — 

After two days of at-times emotional testimony from Caroline Ellison, a former top adviser to fallen crypto mogul Sam Bankman-Fried, defense lawyers were set to begin questioning her on the stand Thursday.

Ellison, 28, told jurors this week that she and Bankman-Fried, whom she dated on and off, committed financial crimes for years. At his direction, she said, executives stole funds from customers of FTX, a crypto exchange, and diverted them for other purposes, including paying back billions of dollars in loans to Alameda Research, a trading firm also run by Bankman-Fried that racked up huge losses betting on crypto price movements.

In Ellison’s telling, she and other members of Bankman-Fried’s inner circle worked together to take the FTX customer funds and lie to investors about the true nature of the two firms’ financial codependence. Ellison herself produced phony financial documents to present to lenders to try to hide Alameda’s borrowing from FTX.

At every turn, Ellison told jurors, it was Bankman-Fried ultimately calling the shots.

By November of last year, when both companies were collapsing, she described an “overwhelming sense of relief” that the inevitable end was finally coming into view. It was “overall the worst week of my life,” but she was glad she wouldn’t have to lie anymore.

That version of events reflects US prosecutors’ contention that Bankman-Fried, 31, orchestrated a yearslong fraud and engaged his business partners in a conspiracy to lie about their crimes.

Former crypto hedge fund Alameda Research CEO Caroline Ellison arrives for Sam Bankman-Fried's trial at Federal Court in New York City, October 11, 2023.

Bankman-Fried has pleaded not guilty to seven criminal counts and could spend the rest of his life in prison if convicted and given the maximum sentence. Ellison and other executives have pleaded guilty and struck cooperation agreements with prosecutors in the hopes of reducing their sentences.

Bankman-Fried’s attorneys have yet to present their case in court. But since his arrest in December last year, Bankman-Fried has repeatedly offered an alternative version that deflects blame from himself and casts alleged financial crimes as honest business mistakes.

Mark Cohen, the head of his defense team, echoed that view in his opening statement last week, telling jurors that Ellison, as CEO of Alameda, neglected to place hedges on firm’s risky bets despite Bankman-Fried telling her to do so.

“Sam didn’t defraud anyone. Sam didn’t intend to defraud anyone. Sam acted in good faith in trying to build and run FTX and Alameda.”

But “things were happening quickly, very quickly,” Cohen said. “Sam and others made hundreds of decisions a day … as a result, some things got overlooked.”

This story is developing and will be updated.

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