Three months earlier than the cryptocurrency market crashed final 12 months, Caroline Ellison, the 27-year-old chief govt of crypto hedge fund Alameda Analysis, was affected by self-doubt.
“I really feel very sad and overwhelmed with my work,” Ms Allison wrote in a February 2022 Google doc. She added, “On the finish of the day, I can not wait to go house, flip off my cellphone, have a drink and get away from all of it.”
Miss Allison had loads to fret about. She did not assume she was match to run Alameda or be a very decided chief, she wrote in one other Google doc. She was additionally going via a breakup with Sam Bankman-Freed, the billionaire entrepreneur who based Alameda after which FTX, one of many world’s largest cryptocurrency exchanges. They met often and Miss Allison was anxious about “making issues bizarre” and “inflicting drama”.
“It doesn’t actually appear like the top is in sight,” she wrote in a February 2022 doc.
Now, Ms. Ellison is able to be the principle witness within the prison trial of Mr. Bankman-Freed, which is scheduled for October 2.
Bankman-Fried, 31, is accused of misusing billions of {dollars} in withdrawals from shopper accounts and faces eight prices of fraud and election violations. His spectacular fall, which bankrupted FTX and Alameda, turned Ms. Ellison from a robust however comparatively personal determine into tabloid hypothesis. In December, she pleaded responsible to fraud and agreed to cooperate with federal prosecutors investigating her ex-boyfriend.
His case is headed for a showdown in a Manhattan courtroom. Two different FTX executives, Nishad Singh and Gary Wan, additionally pleaded responsible and agreed to cooperate. In June, after weeks of authorized wrangling over the fees towards Mr. Bankman-Fried, the decide within the case set a good timetable for trial preparations, asking prosecutors to attract up an inventory of witnesses and supply different ultimate submissions. Prosecutors are anticipated to start coaching a minimum of a number of witnesses in August, two folks with information of the matter mentioned.
As soon as Mr. Bankman-Fried’s girlfriend and considered one of his first staff, Ms. Allison had a singular perception into the founding father of FTX. She additionally recorded a lot of her ideas in writing, making observations about her private {and professional} life in a handwritten diary and Google Docs that have been circulated to the attorneys concerned within the case, based on paperwork reviewed by The New York Occasions and 4 folks accustomed to the investigation.
Beforehand unreported paperwork present new insights into Ms. Allison’s psychology within the ultimate months of FTX’s existence. Miss Allison, now 28, was a prolific author whose Tumblr posts about Harry Potter and Jane Austen have been broadly criticized. However the Google docs are extra private and uncooked, some addressed on to Mr. Bankman-Fried, illustrating the complexity of their relationship and her ambivalence in the direction of Alameda.
In a single Google doc addressed to Mr. Bankman-Fried in April 2022, Ms. Ellison wrote that an earlier break with him “enormously lessened my pleasure in regards to the Alameda.” She added that life in a hedge fund “was too related to you and it was painful.”
A spokesperson for Ms Allison’s authorized staff and Mr Bankman-Fried’s legal professional declined to remark. A spokesman for the US Lawyer’s Workplace for the Southern District of New York in Manhattan, which is dealing with the case, additionally declined to remark.
Ms. Allison, a Stanford graduate, met Mr. Bankman-Fried at a quantitative buying and selling agency on Jane Road, the place he labored after graduating from faculty. They shared a dedication to efficient altruism, a philanthropic motion that has gained adherents within the know-how and monetary industries.
After Mr. Bankman-Fried left Jane Road to discovered Alameda in 2017, he employed Ms. Allison as a dealer. In 2021, he promoted her to co-director together with one other early collaborator, Sam Trabucco.
Mr. Bankman-Fried and Ms. Allison additionally entered right into a rocky romantic relationship, with quite a few breakups and reconciliations. At occasions, Miss Allison anxious that Mr. Bankman-Fried did not assume she was adequate. When he was round, she wrote in a February 2022 Google doc, she had an “intuition to shrink, get smaller, quieter, and undergo others.”
After one breakup, Ms. Ellison reduce off communication with Mr. Bankman-Freed. “I felt very damage/rejected,” she wrote in an April 2022 Google doc. “Gifting away the contact you needed appeared like the one method to regain my sense of energy.”
By final 12 months, Mr. Bankman-Fried had turn out to be some of the well-known crypto entrepreneurs on the planet, along with his face adorning billboards and journal covers. His fame appeared to make life tough for Ms. Ellison at FTX and Alameda.
Staying put meant “being by your aspect on a regular basis, continually listening to folks speak about how fantastic you might be,” she wrote in an April 2022 doc.
Ms Allison acquired far much less compensation than different FTX and Alameda executives, although it is unclear if she knew this. The founders of the trade and different key staff acquired $3.2 billion in funds and loans, based on courtroom paperwork. Of that quantity, $6 million went to Ms. Ellison, in comparison with $587 million held by Mr. Singh, FTX’s CTO, and $246 million held by Mr. Wang, one of many founders. Mr. Bankman-Fried acquired $2.2 billion.
In Could 2022, the cryptocurrency market crashed, inflicting coin costs to skyrocket and several other well-known corporations to go bankrupt. Regulators allege that throughout the disaster, Mr. Bankman-Fried, Mr. Wang, Mr. Singh, and Ms. Ellison stuffed a gap in Alameda’s accounts utilizing billions of shopper funds deposited with FTX.
Even earlier than that, Miss Allison doubted her skills. In an April 2022 doc, she compiled an inventory of areas wherein she struggled, together with “management” and “willpower.”
“Operating the Alameda is just not like what I do. has a comparative benefit or is nicely suited to it,” she wrote.
By final fall, Mr. Bankman-Fried had misplaced religion within the Alameda. In accordance with courtroom data, he thought-about closing the agency and invested greater than $400 million in one other buying and selling firm, Modulo Capital, run by one other former Jane Road dealer whom he additionally met.
Ms Allison has expressed envy and resentment in the direction of Modulo in a few of her writings, in addition to a sense of being squeezed out, mentioned two individuals who noticed the papers.
Mr. Bankman-Fried’s enterprise empire collapsed in November after a run on deposits revealed an $8 billion shortfall.
“I solely had a rising concern of today that weighed on me,” Ms. Ellison wrote to him that very same month in a message that was taken from courtroom data. “Now that it is really taking place, it is simply good to be completed with it.”
In December, Mr. Bankman-Freed was arrested within the Bahamas, the place FTX was based mostly, and brought to jail close to the luxurious penthouse he and Ms. Ellison shared with eight different roommates, together with Mr. Wang and Mr. Singh. Mr. Bankman-Fried is at the moment below home arrest at his dad and mom’ house in Palo Alto, California.
Individuals who know Ms. Ellison say they have been struck by her seriousness and willingness to confess her personal shortcomings. In courtroom in December, she mentioned she was “actually sorry” in regards to the fraud. “I knew it was mistaken,” she mentioned.
Ms Allison is anticipated to repeat this allegation at Mr Bankman-Freed’s trial, which is anticipated to final 4 or 5 weeks. A lot of the litigation will revolve round messages that Mr. Bankman-Fried and three staff exchanged on the Sign messaging app, two folks briefed on the matter mentioned.
As a girl within the male-dominated crypto business, Ms Ellison could seem extra sympathetic to jurors than different cooperators, based on attorneys accustomed to the case. In an interview final 12 months, Mr. Bankman-Fried shifted among the blame for the crash to Alameda, saying he had little involvement within the day-to-day working of the hedge fund.
Moira Penza, a former federal prosecutor, mentioned high authorities officers pleaded responsible in testimony and that the “energy distinction” between Ms. Ellison and Mr. Bankman-Freed may make her voice persuasive.
“This doesn’t appear to me to be an efficient technique for shifting blame to defendants,” Ms. Penza mentioned. “Particularly with somebody who was as soon as a romantic accomplice.”
