After an intense three days on the witness stand, Caroline Ellison, a former top deputy to FTX founder Sam Bankman-Fried (SBF), wrapped up her testimony on Oct. 12.
The day was characterized by emotional revelations, critical audio recordings, and frequent judicial interventions.
Ellison concludes testimony
Ellison’s detailed account did not yield any breakthroughs that could be viewed as game-changers for SBF’s defense. However, her revelations painted a picture of a labyrinthine relationship with her ex-boss — from personal breakups to professional disagreements.
Her narrative combined detailed explanations of past events with a recounting of her professional dynamics with SBF. While Ellison’s testimony was laden with intricate details of her time at Alameda, it also touched upon her professional interactions with SBF, especially after their personal relationship ended in April 2022.
Key moments, such as the end of her personal connection with SBF in April 2022, and a dramatic FBI search at her family home on Nov. 16, 2022, were brought into the discussion. Ellison’s description of these events revealed the deep impact they had on her personal and professional life.
The courtroom witnessed several requests for sidebars — off-the-record discussions among the judge, prosecutors, and defense attorneys — during Ellison’s revelations.
Judge Lewis Kaplan, who is presiding over the case, occasionally showed signs of impatience with these interruptions and emphasized the need for a streamlined process. Eventually, he reprimanded both sides for the interruptions and urged them to limit their sidebars.
The Nov. 9 audio recordings
Following Ellison’s in-depth testimony, a former software engineer at Alameda, Christian Drappi, took the stand.
Drappi was initially hired in May 2021 and spent more than a year working for the company. His testimony detailed his astonishment upon discovering the illicit activities and the fund’s misuse of FTX customer funds.
During his testimony, the courtroom was presented with audio clips from an all-hands meeting held by Ellison on Nov. 9 that were introduced into evidence by a trader who worked for Alameda.
In the meeting, Ellison disclosed to Alameda Research employees that the crypto hedge fund had misused billions in FTX customer funds to make high-risk venture investments and to repay Alameda’s various loans.
The meeting took place just days before Alameda’s implosion and the subsequent bankruptcy filings for FTX and related companies. The meeting was recorded by a trader who had joined Alameda only a few days prior. Drappi said he was so shocked by the revelations in the meeting that he resigned within a day.
BlockFi founder Zac Prince was the last to take the stand for the day and provided a brief but impactful testimony. He told the court that the now-bankrupt company had extensive dealings with Alameda and had made significant loans to the company — amounting to hundreds of millions of dollars.
Prince also said that BlockFi had held considerable amounts of cryptocurrency on the FTX platform due to its relationship with Alameda.
As the day’s proceedings drew to a close, the trial had taken the public on a roller-coaster ride — from the secret financial dealings of a crypto giant to the intimate personal revelations of its key players. The testimonies and evidence presented on this day are bound to have lasting implications as the trial progresses.
In other news…
Judge Kaplan criticizes defense tactics in SBF trial
Judge Kaplan voiced concerns during the SBF trial about defense counsel Mark Cohen’s unconventional approach to cross-examining witness Caroline Ellison.
Cohen’s inquiries often echoed topics already addressed in the prosecution’s examination, which prompted Judge Kaplan to claim he had never seen a cross-examination of a collaborator done in such a way.
The prosecution frequently contested the pertinence of Cohen’s questions, leading to numerous sidebar discussions with the judge at the defense’s request.
FTX Secures $175M claim in Genesis settlement; drops larger counterclaims
FTX will receive a $175 million claim from the bankruptcy estate of crypto lending firm Genesis Global Capital, putting to rest potential counterclaims amounting to over $1 billion.
The settlement follows a chain of events involving the collapse of FTX and subsequent mass withdrawals from Genesis, which had significant financial ties to FTX.
While some major creditors initially opposed the terms, Judge Lane found them reasonable. A final hearing is scheduled for Oct. 18.
Judge permits charitable evidence in SBF trial, denies other requests
Judge Kaplan has mostly upheld his pretrial decisions in the case against FTX founder Sam Bankman-Fried. However, evidence of SBF’s charitable contributions will be permitted, but not to prove his innocence.
Despite the defense’s pleas, Kaplan has excluded arguments concerning FTX’s regulatory status and details from the firm’s bankruptcy proceedings. He also dismissed allegations of inconsistency in his decisions.
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