Caroline Ellison, the former chief executive of Sam Bankman-Fried's hedge fund, gave evidence on Tuesday that the former crypto mogul directed her and others to defraud customers of his FTX exchange by taking their money without their knowledge.
Ms Ellison, who said she previously dated Mr Bankman-Fried, depicted her former boss as an ambitious young man who had no qualms about sharing misleading financial information with lenders and thought he could one day become US president.
She said the hedge fund, Alameda Research, took about $10 billion in FTX customer funds to repay its debts and make investments. The fund gained the money through a $65 billion line of credit it had on the exchange, and from funds FTX customers deposited into an Alameda bank account when FTX lacked its own account.
“He was the one who set up these systems that allowed Alameda to take the money and he was the one who directed us to take customer money to repay our loans,” Ms Ellison said.
The evidence from Ms Ellison was keenly awaited: she is one of three ex-members of the 31-year-old former billionaire's inner circle who have pleaded guilty to fraud charges and agreed to co-operate with the Manhattan US Attorney's office.
Prosecutors say Mr Bankman-Fried plundered billions in customer funds to prop up Alameda, buy real estate and donate more than $100 million to US political campaigns before FTX declared bankruptcy in November 2022 following a collapse that shocked financial markets and left his reputation in tatters.
Mr Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy, and has argued that while he made mistakes running FTX, he never intended to steal funds.
In his opening statement last week, defence lawyer Mark Cohen told jurors to question whether co-operating witnesses like Ms Ellison were putting a new, nefarious spin on old decisions by Mr Bankman-Fried which they had originally agreed with.
Gary Wang, FTX's former technology chief, gave evidence that Mr Bankman-Fried falsely tweeted that FTX was “fine” in November as the exchange faced surging demand for withdrawals.
A third co-operating witness, former FTX engineering chief Nishad Singh, is also expected to give evidence at the trial, which could last up to six weeks.
