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


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

Beyond work, the couple had a lot in common: Both were children of accomplished academics, studied mathematics at prestigious universities and argued the importance of giving away money to make the world a better place. Both also lived with colleagues in a luxury penthouse in the Bahamas, and were reported to be romantically involved at times.

Now, however, Ellison has split from Bankman-Fried in a big way: She is cooperating with federal prosecutors who have accused him of orchestrating one of the biggest financial frauds in US history.

Last month, Ellison, 28, pleaded guilty to charges that she, Bankman-Fried and other FTX executives conspired to steal clients’ money to invest in other companies, make political donations and buy expensive real estate — charges that carry a maximum sentence. 110 years in prison. On a 19 December hearing, Ellison apologized to FTX customers and investors, saying she knew what she did was wrong.

Bankman-Fried, 30, is next in court Jan. 3, when he is likely to plead not guilty, according to a person familiar with the case who spoke on condition of anonymity to discuss private information. In a series of interviews before his arrest on December 12, he insisted that he was only guilty of mismanagement and did not deliberately defraud anyone.

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

Ellison’s deal 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 lawyer and former federal prosecutor. “They are fully cooperating,” he said.

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

Post Reporter podcast: The downfall of FTX

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

While Bankman-Fried’s parents are Stanford law professors, Ellison’s mother and father are economics professors at the Massachusetts Institute of Technology. Her father, who wrote mathematics textbooks for children, got her into math at a young age. She also read a lot, tackling a thick Harry Potter book when she was just 5 because she was too impatient to wait for her parents to read it to her, she said.

Her father encouraged her and her sisters to enter math competitions, which she held throughout middle and high school before going on to study mathematics at Stanford in 2012. She chose the Bay Area university mainly because it was the “best school that isn’t at Boston, she said.

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

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

Bankman-Fried told her about the cryptocurrency trading firm he had recently started – Alameda Research. Soon she left Jane Street to join him. “It seemed like too cool an opportunity to pass up,” she said.

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

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

At FTX, however, Ellison’s job was less about dodging authoritarian governments and more about cashing in on the explosion of interest and investment in cryptocurrencies. The company was one of the biggest winners of the massive crypto boom of 2020 to 2021, when ordinary people around the world invested in bitcoin, ethereum and a variety of other tokens. The value of the worldwide market swelled to around $3 trillion, about the same as the gross domestic product of Great Britain.

FTX quickly grew as one of the most important places where people could buy, sell and speculate on cryptocurrencies. Its ads featured sports stars like Tom Brady and Stephen Curry, and it paid millions for the naming rights to the Miami Heat basketball team’s stadium. Many users invested on margin, meaning they placed financial bets with money borrowed from the exchange, hoping that their investments would pay off. By the end of 2021, FTX was handling around $350 million in crypto trades 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 also played a key role as a market maker on the FTX exchange itself, stepping in to buy and sell tokens and other digital assets on large volumes to increase liquidity on the stock exchange and make it more attractive to customers.

In interviews, Ellison talked about the challenges and excitement of the job.

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

She advanced in the firm, and Bankman-Fried became her co-CEO, along with Sam Trabucco, in 2021. In August 2022, Trabucco resigned, and Ellison became Alameda’s sole executive. (Trabucco did not respond to a request for comment, and his whereabouts are unknown.) In a January 2021 podcast, Ellison described how she was in charge of the trade, and Bankman-Fried’s involvement declined over time.

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

“Nothing like regular amphetamine use to make you appreciate how stupid a lot of normal, unmedicated human experience is,” Ellison tweeted last year.

Like Bankman-Fried, Ellison was an advocate of effective altruism, a philanthropic philosophy that encourages bright young people to take well-paying jobs, accumulate wealth and donate it. She had found the movement while at Stanford, surrounded by smart and soon-to-be wealthy people like herself.

“The ultimate goal, or one of my main goals, I think, is to maximize my impact,” she said in the July 2020 podcast interview. “Working in Alameda is kind of good for that for a number of reasons. I mean , it is directly to make money.”

Bankman-Fried himself had promised to give his billions to the movement. In an interview posted on January 21, 2021, also with the internal FTX podcast, Ellison again spoke about how she saw the value in the work she did.

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

‘Crypto winter’ has arrived. And it looks like an ice age.

Behind the scenes, however, FTX broke the law, according to federal prosecutors. The company took customer deposits and lent them to Alameda, who 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 the companies’ clients did not, essentially allowing it to borrow freely without having to pay back loans or face the same consequences if they lost money on trades they made with borrowed funds – a practice Ellison was aware as far back as 2019, she testified earlier this month.

In November, Bankman-Fried said at the New York Times’ DealBook conference that he never intentionally commingled funds between Alameda and FTX, and that he was surprised by the size of Alameda’s exposure on the FTX exchange.

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

Alameda borrowed huge amounts of money from other cryptolenders to fund Bankman-Fried’s investments and donations, but when the price of cryptoassets plummeted through 2022, those lenders demanded the money back. Ellison and her colleagues paid it back with customer money, she said, something the platform’s users didn’t realize was happening.

And when investors asked questions, she, Bankman-Fried and other colleagues agreed to lie, covering up the company’s true financial condition and the special arrangements for Alameda to use customer funds freely, Ellison told the judge.

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

The judge asked if she knew that was also illegal.

Dalton Bennett and Nitasha Tiku contributed to this report.

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