Where is Caroline Ellison now? How Sam Bankman-Fried's ex-GF helped perpetrate biggest financial crime in US history
NEW YORK CITY, NEW YORK: Caroline Ellison, once hailed as a "Stanford math whiz" who ascended to the upper echelons of the cryptocurrency world by age 28, fell from grace amid allegations that she used her position for personal gain. Ellison was the star witness in Bankman-Fried's fraud trial in Manhattan, New York last month.
In the hopes of receiving a lesser sentence for her own role in the massive FTX scam, Ellison pled guilty to fraud and claimed he directed her to funnel $14 billion in client funds from Alameda to FTX. Ellison herself is scheduled to be sentenced in late 2024 for the crimes she pleaded guilty to, per New York Times.
The genesis of a troubled partnership
Ellison, the daughter of MIT economic professors, initially entered the cryptocurrency scene in March 2018 when she joined Alameda Research, a digital currency hedge fund founded by Bankman-Fried. Their initial connection revolved around the concept of "effective altruism," aiming to accumulate wealth to contribute to charitable causes.
As their relationship developed, Ellison claimed that Bankman-Fried directed her to funnel a staggering $14 billion in client funds from Alameda to FTX, his cryptocurrency exchange.
Despite her limited trading experience of only 18 months, Ellison eventually rose to become the co-chief executive of Alameda in 2021 and, subsequently, the Chief Executive Officer in 2022 as Bankman-Fried chose to focus on FTX full-time. Under her "leadership," Alameda's trading volume soared, reaching approximately $5 billion a day by the summer of 2021.
Ellison even gained recognition in Forbes' "20 Under 30" list, giving the impression of a young math prodigy who excelled in the risky world of cryptocurrency trading.
"Being comfortable with risk is very important," she said on a podcast in 2022. "There are a lot of people who are very smart, but aren't good, necessarily, at the messy world of trading—especially crypto."
However, this facade crumbled rapidly when both Alameda and FTX were exposed as scammers shortly after Ellison assumed the role of being the sole CEO at Alameda. Claims emerged that the firms misappropriated client funds for risky investments, raising suspicions of wrongdoing.
From math genius to scammer
Ellison's previous statements, which were once perceived as reflections of her confidence, began to be seen as evidence of malpractice. "This was very much like, oh, yeah, we don't really know what we're doing," she had told Forbes about Alameda's success ahead of the fall.
She had also boasted about needing only "elementary grade math" to run the firm and had expressed her aversion to common trading safeguards like stop-loss orders.
This explains a lot about what happened at Alameda under CEO Caroline Ellison, as well as her alleged $1.3B margin deficit at FTX.
— Markets & Mayhem (@Mayhem4Markets) December 6, 2022
"Use very little math. Use a lot of elementary school math."
"We tend not to have things like stop losses." https://t.co/OupUvHH8hw pic.twitter.com/1UN6DRAlGZ
The entire operation was described as being "run by a gang of kids in the Bahamas," per Forbes, with reports suggesting that Ellison and Bankman-Fried were part of a larger group involved in the Bahamas.
The allegations of financial fraud reached unprecedented levels, with FTX allegedly lending Alameda billions in clients' funds without their knowledge or consent.
The crisis at FTX occurred when customers rushed to withdraw their funds, and the company was unable to meet their demands.
In the courtroom, Ellison, who is now 28 years old, admitted to her role in the scheme, confessing to providing "materially misleading financial statements" to cover up the illicit arrangement she had with Bankman-Fried, the Daily Mail reported.
Blame game and internal conflict between Caroline Ellison and Sam Bankman-Fried
In an unpublished 250-page memo, Bankman-Fried shifted blame onto Ellison, claiming she was ill-prepared for her role and resisted implementing his trading strategies that could have averted the collapse.
"She continually avoided talking about risk management — dodging my suggestions — until it was too late... Every time that I reached out with suggestions, it just made her feel worse. I'm sure that being exes didn't help," he wrote.
The couple's relationship ended "the same way most of my relationships end - They want more intimacy and commitment and public visibility than I do, and I feel claustrophobic," per the memo.
Meanwhile, Ellison's shocking testimony also claimed that Bankman-Fried believed in the influence of political spending.
"He thought it was very effective, you could get very high returns in terms of influence by spending relatively small amounts of money," she testified, adding, "He donated $10 million to (Joe) Biden and that was a relatively small amount of money. He felt that was something that got him influence and recognition."