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18 October 2023

Caroline Ellison: victim or crypto queen?

Sam Bankman-Fried’s former girlfriend and Alameda CEO emerged as the star witness for the prosecution in the trader’s trial for fraud. But just how seriously should we take her?

By Sophie McBain

Caroline Ellison had always avoided the limelight – until she appeared in a New York court on 10 October to testify against her former boss and on-off lover, the disgraced crypto-billionaire Sam Bankman-Fried, who is on trial for fraud. The former CEO of the cryptocurrency trading firm Alameda Research and self-described “fake charity nerd girl” gave no interviews and issued no statements after Bankman-Fried’s crypto empire collapsed in November 2022, when it was found that more than $8bn of customer funds were missing from his cryptocurrency exchange, FTX. He denies the charges. Outside the courtroom she looked a hunched and hunted figure, with thick glasses and a pale, owlish face. Inside, she was the prosecution’s star witness, and between the nervous giggles observers detected an air of defiance as she accused Bankman-Fried of leading her to lie and steal.

Alameda Research was majority-owned by Bankman-Fried, who set up the firm in 2017 and appointed Ellison as co-CEO with Sam Trabucco in October 2021. By 2022, when the crypto market crashed, it had racked up billions of dollars in debt and was using FTX’s customer deposits to repay it. Bankman-Fried has blamed Alameda’s problems on Ellison’s financial incompetence. But over three days on the stand, Ellison accused Bankman-Fried of “directing” her to commit crime by secretly using FTX money to shore up the firm. A recording of an all-team meeting in November 2022 appears to support her account. Ellison also accused Bankman-Fried of instructing her to fudge Alameda’s books and pay out a bribe. She said he had corrupted her morals by telling her that the money raised would be used to do so much philanthropic good that the ends justified the means. “I think it made me more willing to do things like lie and steal over time,” she said.

Dating him while he was her boss was “awkward”, she told the court, and heightened the power imbalance between them: “I… wanted more from our relationship but often felt like he was distant or not paying attention to me.” Ellison was the first in Bankman-Fried’s circle to flip, pleading guilty in December 2022 to charges of fraud and money laundering, and cooperating with prosecutors in hope of leniency. Bankman-Fried, in turn, was jailed in August this year for witness tampering after he leaked Ellison’s diaries to the New York Times. In other words, a subplot to one of the biggest fraud trials in US history is an epically bad break-up. Was Ellison a scorned lover and powerless sidekick, or was she – as she once described herself – the ultimate “girlboss”?

Ellison and Bankman-Fried were both precocious children of university professors: Ellison’s parents teach economics at MIT and Bankman-Fried’s law at Stanford. Ellison studied maths at Stanford and Bankman-Fried at MIT. As students, both became involved in effective altruism (EA), a movement dedicated to doing good “better” by crunching numbers to determine the best philanthropic causes. EA encouraged graduates from elite universities to pursue lucrative careers so they could “earn to give”, which is how the pair met at the New York trading firm Jane Street Capital in 2017. The following year they met for coffee – by some accounts Ellison was on her way to a live-action role-play event and dressed as a “sultry wood nymph”– and Bankman-Fried persuaded her to join Alameda. They started sleeping together soon after.

[See also: Why Sam Bankman-Fried’s deluded world-view matters]

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Both share an ironical sense of humour that makes it hard to gauge their sincerity. Bankman-Fried pledged more than $1bn to EA causes, but also described ethics as a “dumb game we woke Westerners play”. Writing under the username “fake charity nerd girl” on a since-deleted Tumblr blog titled “WorldOptimization”, Ellison wrote that she was into “contrarianism and being an edgelord [provocateur]” and described crypto variously as “99 per cent bullshit” and “mostly scams and memes”. (Ellison has not confirmed she is the author of the Tumblr, however it links to her Twitter account and Bankman-Fried told the NYT it is hers.) As Bankman-Fried’s wealth grew to an estimated $26bn, he and Ellison suddenly found cool kids wanted to get in on their jokes. “Success is when people no longer attribute your social inadequacy to your deep-seated personal flaws but rather ‘oh she’s a quant [quantitative analyst]’,” Ellison once wrote.

While many effective altruists are deeply committed to humanitarian causes, Ellison’s blog, which she began writing at Stanford in 2014, positions her within the movement’s darker fringes. Between posts about her love for Taylor Swift and Harry Potter are musings about her interest in “HBD”, or human biodiversity, a euphemism for racist ideas about IQ differences between populations, and her sympathy for alt-right “red pill women” and men’s rights activists. Ellison, who is 28 and grew up Catholic, describes herself as a former “trad” – someone who believes in traditional female roles – and who thinks that “Everyday Feminism is cancer”. She recalls that as a champion school “mathlete” she caused discomfort by pointing out the “self-evident fact” that she was outnumbered by boys because “girls just aren’t as good at math”.

In his biography of Bankman-Fried, Going Infinite, Michael Lewis portrays Ellison as insecure, worrying that Bankman-Fried was keeping their romance secret because he was ashamed. George Lerner, FTX’s in-house psychiatrist, told Lewis that while most EAs are committed to self-sacrifice, Ellison was the exception in that “she might be willing to trade EA for reciprocation of love any day”. Ellison and Bankman-Fried dated intermittently until 2022 and lived together in Bankman-Fried’s $30m penthouse in the Bahamas, which they shared with eight other colleagues. According to the website CoinDesk, all ten were at one point paired up with one another. “When I first started my foray into poly[amory], I thought of it as a radical break from my trad past, but tbh [to be honest] I’ve come to decide the only acceptable style of poly is best characterised as something like ‘imperial Chinese harem’,” Ellison wrote in 2020. “None of this non-hierarchical bullshit… there should be vicious power struggles for the higher ranks.”

In her posts, Ellison seems both power-hungry and immature, believing that her job was merely a game. In 2020, when she was working in Hong Kong and China began cracking down on the pro-democracy movement there, she saw herself as a “sci-fi protagonist” helping “citizens of repressive regimes to move money anywhere in the world”. The next year, she oscillated between wondering “what do CEOs of real companies do?” and bragging: “I love it when fiction has representation of literal girlbosses. Like women managing people and running stuff. I’m like omg it me.”

Except by 2022, the pressure was building on Ellison, who was nominally solely in charge of Alameda after her co-CEO left in August. She told the court it was a “relief” when Alameda and FTX finally collapsed and she realised she didn’t have to lie any more. During her testimony, a recording was released of a meeting Ellison convened on 9 November when she told her shocked team that Alameda had lost potentially billions of FTX customer money. “Mostly I want to say sorry, and this really sucks,” she said. As the meeting wound down, a participant thanked her for her honesty. She giggled again, and then she muttered something I had to relisten to twice: “It was kind of fun, I don’t know.”

[See also: Sam Bankman-Fried and the effective altruism delusion]

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This article appears in the 18 Oct 2023 issue of the New Statesman, War on Three Fronts