The founder of failed crypto exchange FTX blamed his ex-girlfriend as the extent of the company’s $11 billion debt became clear.
Court documents showed that Sam Bankman-Fried wrote to his male colleagues that Caroline Ellison ‘is not a natural leader, and probably never will be.’
In the September 2022 document, Bankman-Fried said she made a “critical” mistake by not making a risky investment he suggested to her.
“These kinds of mistakes happen when I’m not actually running the show,” sniffs Bankman-Fried.
He also claimed that the culture at Alameda Research, FTX’s sister company that Ellison ran, had become “mediocre” at best and said his ex was “not good enough to be trusted” with its liquidation.
Sam Bankman-Fried blamed Caroline Ellison for the collapse of FTX in court documents obtained by DailyMail.com. Bankman-Fried claimed that the culture at Alameda Research, FTX’s sister company that Ellison ran, had become “mediocre” at best and said his ex was “not good enough to be trusted” with its liquidation.
Court documents showed that Sam Bankman-Fried wrote to his male colleagues that Caroline Ellison was ‘not a natural leader, and probably never will be’
The document appeared a day before Ellison was to testify against Bankman-Fried as one of the prosecution’s star witnesses.
The 29-year-old daughter of two MIT professors, who posted about her love of Harry Potter in online blogs, has already pleaded guilty to fraud charges.
Ellison is a 29-year-old daughter of two MIT professors
Prosecutors allege that FTX was a “house of cards” worth $32 billion at its peak, but collapsed last November after media reports raised questions about its finances.
Bankman-Fried, 31, pleaded not guilty to 13 charges between 2019 and 2011, including fraud, money laundering and violations of campaign finance laws that could have sent him to prison for 115 years.
Seven of the allegations are being dealt with in the current trial and the rest will appear in court next year.
Alameda is at the center of the case against Bankman-Fried and prosecutors alleged it operated as a slush fund that used $8 billion of FTX clients’ money to pay for lavish expenses, real estate purchases and to make political donations.
Customers had no idea their money was being used for this, it is claimed.
Last September, amid falling crypto prices, Bankman-Fried decided to close Alameda after a report in Bloomberg said its relationship with FTX was much closer than thought.
Bankman-Fried feared it would erode trust in the company, the court heard, because he had publicly insisted they were separate.
He recently ordered a full accounting of Alameda and found it owed $11 billion to FTX.
Bankman-Fried created the Google document outlining the reasons for the liquidation of Alameda, which he did not share with Ellison, despite his management of the company.
Instead, it just went to FTX co-founder Gary Wang and Nishad Singh, FTX’s head of engineering.
The document said that it ‘may be time for Alameda Research to close.’
Bankman-Fried wrote: ‘Honestly, it was probably time to do this a year ago.
‘The reasons: the PR hit of Alameda and FTX both existing is very big.
“The current Alameda leadership is good, but not good enough to be trusted with such a large operation.”
Sam Bankman-Fried dated Caroline Ellison and hired her as head of FTX’s sister company Alameda Research.
Bankman-Fried faces up to 115 years in prison if convicted on a slew of fraud charges
The court heard that in the summer of 2022, Ellison and Bankman-Fried talked about Alameda making a risky investment bet, known as a hedge, but she decided not to.
Bankman-Fried said that decision “just cost more than all the money that Alameda has ever made or will ever make, and it’s the kind of critical mistake we’re likely to make if I don’t actually run the program there.”
He continued: ‘Caroline is not a natural leader, and probably never will be. She is also unhappy at Alameda, and does so because she thinks it is important.
Nishad Singh has admitted his part in the scheme and is expected to testify at the trial
‘Alameda’s culture has become mediocre at best. People don’t bother coming into the office or being together.
‘There is a brain drain – we hit a downward spiral where good people leave, and then there are no good people, so future good people leave (or don’t join).
‘There is not sufficiently strong leadership to reverse this’.
Bankman-Fried wrote that there was a “much stronger culture and leadership” at Modulo, a Bahamas-based hedge fund that received $475 million in seed capital from Alameda.
Modulo was run by a woman called Lily, who Bankman-Fried also dated for a time, the court heard.
In the document, Bankman-Fried wrote dismissively: ‘I can’t make everyone happy, and if people are unhappy, they have to leave.’
In his testimony, Wang said Bankman-Fried was much more involved with Alameda than the document suggested.
He had the Alameda balance on a screen on his desk most of the time and he still had a majority stake in both companies, the jury heard.
All major decisions were ultimately made by Bankman-Fried, Wang told the jury.
Previous reports said Ellison was paid far less than other top FTX executives, and may not have known about the pay gap.
Wang claimed Bankman-Fried ordered a $700 million loss placed on the accounts of its sister company because they were more secretive than FTX
Gary Wang, co-founder of FTX, took the stand during Sam Bankman-Fried’s trial, claiming that the company had been stealing customers’ money for three years.
Court filings said that FTX’s founders and other top staff received $3.2 billion in payments and loans.
Ellison got $6 million compared to $587 million for Singh, $246 million for Wang and $2.2 billion for Bankman-Fried.
Writing in her personal diaries, Ellison did express concern about her ability to run Alameda, saying that she did not feel it was something she was “comparatively favored or well suited to do.”
The Stanford University math graduate wrote in February 2022: ‘I’m feeling pretty unhappy and overwhelmed with my job.
“At the end of the day, I can’t wait to go home and turn off my phone and have a drink and get away from it all.”
After the breakup with Bankman-Fried, she cut off all communication with him.
Writing in April 2022, she said: ‘I felt pretty hurt/rejected. Not giving you the contact you wanted felt like the only way I could regain a sense of power.’
Bankman-Fried reportedly leaked the diary to the New York Times, which published excerpts before his trial.
That and a number of other violations of his bail conditions led Judge Lewis Kaplan to revoke Bankman-Fried’s bail and hold him in the grim Metropolitan Detention Center before and during his trial.
During her testimony, Ellison will likely be questioned about her online blog posts about her engaging in a polyamorous lifestyle.
She has also written about drug use and wrote about her ‘regular’ amphetamine use in 2021.
In April that year she wrote: ‘Nothing like regular amphetamine use to make you appreciate how stupid very normal, unmediated human experience is’.
Ellison pleaded guilty in December last year, telling the court she was ‘truly sorry for what I did’. She said that she ‘knows it’s wrong’ and that she ‘wants to take responsibility for my actions’.