Inside the Private Writings of Caroline Ellison, Star Witness within the FTX Case

Three months earlier than the cryptocurrency market imploded final yr, Caroline Ellison, the 27-year-old chief government of the crypto hedge fund Alameda Research, was racked with self-doubt.

“I have been feeling pretty unhappy and overwhelmed with my job,” Ms. Ellison wrote in a Google doc in February 2022. She added: “At the end of the day I can’t wait to go home and turn off my phone and have a drink and get away from it all.”

Ms. Ellison had so much on her thoughts. She didn’t assume that she was properly suited to operating Alameda or was a very decisive chief, she wrote in one other Google doc. She was additionally going by a breakup with Sam Bankman-Fried, the billionaire entrepreneur who had based Alameda after which FTX, one of many world’s largest cryptocurrency exchanges. They had dated on and off, and Ms. Ellison fearful about “making things weird” and “causing drama.”

“It doesn’t really feel like there’s an end in sight,” she wrote within the February 2022 doc.

Now Ms. Ellison is poised to be a star witness at Mr. Bankman-Fried’s legal trial, which is scheduled for Oct. 2.

Mr. Bankman-Fried, 31, is accused of misusing billions of {dollars} taken from buyer accounts and faces eight counts of fraud and election legislation violations. His spectacular downfall, which despatched FTX and Alameda out of business, reworked Ms. Ellison from a robust — but comparatively non-public — determine right into a goal of tabloid hypothesis. In December, she pleaded responsible to fraud fees and agreed to cooperate with the federal prosecutors investigating her former boyfriend.

His case is dashing towards a courtroom showdown in Manhattan. Two different prime FTX executives, Nishad Singh and Gary Wang, have additionally pleaded responsible and agreed to cooperate. In June, after weeks of authorized wrangling over the fees towards Mr. Bankman-Fried, the choose within the case set a brisk schedule for the run-up to the trial, asking prosecutors to give you a witness checklist and produce different remaining supplies. Prosecutors are anticipated to start getting ready not less than some witnesses in August, two folks with information of the matter mentioned.

As Mr. Bankman-Fried’s sometime-girlfriend and considered one of his earliest hires, Ms. Ellison had distinctive perception into the FTX founder. She additionally recorded lots of her ideas in writing, making observations about her private {and professional} life in a handwritten diary and on Google paperwork which have circulated amongst legal professionals concerned within the case, in accordance with paperwork reviewed by The New York Times and 4 folks conversant in the investigation.

The paperwork, which haven’t been beforehand reported, supply new perception into Ms. Ellison’s psychology in the course of the remaining months of FTX. Ms. Ellison, now 28, was a prolific author whose Tumblr posts about Harry Potter and Jane Austen have been extensively dissected. But the Google paperwork are extra private and uncooked, with some immediately addressed to Mr. Bankman-Fried, illustrating the complexity of their relationship and her ambivalence about Alameda.

In one Google doc addressed to Mr. Bankman-Fried in April 2022, Ms. Ellison wrote that an earlier breakup with him had “significantly decreased my excitement about Alameda.” Life on the hedge fund, she added, “felt too associated with you in a way that was painful.”

A representative for Ms. Ellison’s legal team and a lawyer for Mr. Bankman-Fried declined to comment. A spokesman for the U.S. attorney’s office for the Southern District of New York in Manhattan, the unit prosecuting the case, also declined to comment.

Ms. Ellison, a Stanford graduate, got to know Mr. Bankman-Fried at Jane Street, the quantitative trading firm where he worked after college. They shared a commitment to effective altruism, the charitable movement that has gained adherents in the tech and finance industries.

After Mr. Bankman-Fried left Jane Street to start Alameda in 2017, he recruited Ms. Ellison as a trader. In 2021, he promoted her to co-chief executive, alongside another early hire, Sam Trabucco.

Mr. Bankman-Fried and Ms. Ellison also started an unsteady romantic relationship, with multiple breakups and reconciliations. At times, Ms. Ellison worried that Mr. Bankman-Fried thought she wasn’t good enough. When he was around, she wrote in the February 2022 Google document, she had “an instinct to shrink and become smaller and quieter and defer to others.”

After one split, Ms. Ellison cut off communication with Mr. Bankman-Fried. “I felt pretty hurt/rejected,” she wrote in the April 2022 Google document. “Not giving you the contact you wanted felt like the only way I could regain a sense of power.”

By last year, Mr. Bankman-Fried had become one of the world’s most prominent crypto entrepreneurs, his face plastered on billboards and magazine covers. His fame seemed to make life at FTX and Alameda harder for Ms. Ellison.

Staying put meant “having to be around you all the time, hearing people talk about how great you are all the time,” she wrote in the April 2022 document.

Ms. Ellison was compensated far less generously than other top executives at FTX and Alameda, though it’s unclear whether she was aware of it. According to court filings, the exchange’s founders and other key employees received $3.2 billion in payments and loans. Of that total, $6 million went to Ms. Ellison, compared with $587 million for Mr. Singh, FTX’s head of engineering, and $246 million for Mr. Wang, one of the founders. Mr. Bankman-Fried received $2.2 billion.

In May 2022, the crypto market crashed, sending coin prices spiraling and plunging several prominent companies into bankruptcy. During the crisis, regulators have asserted, Mr. Bankman-Fried, Mr. Wang, Mr. Singh and Ms. Ellison filled a hole in Alameda’s accounts using billions in customer funds deposited with FTX.

Even before then, Ms. Ellison doubted her own abilities. In the April 2022 document, she made a list of areas where she struggled, including “leadership” and “decisiveness.”

“Running Alameda doesn’t feel like something I’m that comparatively advantaged at or well suited to do,” she wrote.

By last fall, Mr. Bankman-Fried had lost faith in Alameda. He considered shutting the firm, according to court records, and invested more than $400 million in another trading company, Modulo Capital, which was led by a different former Jane Street trader whom he had also dated.

Ms. Ellison expressed jealousy and resentment toward Modulo in some of her writings, as well as a feeling that she was being squeezed out, two people who have seen the documents said.

Mr. Bankman-Fried’s business empire collapsed in November after a run on deposits exposed an $8 billion deficit.

“I just had an increasing dread of this day that was weighing on me,” Ms. Ellison wrote to him in a message that month, which was excerpted in court records. “Now that it’s actually happening it just feels great to get it over with.”

In December, Mr. Bankman-Fried was arrested in the Bahamas, where FTX was based, and taken to a prison not far from the luxury penthouse that he and Ms. Ellison had shared with eight other roommates, including Mr. Wang and Mr. Singh. Mr. Bankman-Fried is now under house arrest at his parents’ home in Palo Alto, Calif.

People who know Ms. Ellison say they have been struck by her earnestness and her willingness to admit her own failings. In court in December, she said she was “truly sorry” for committing fraud. “I knew that it was wrong,” she said.

Ms. Ellison is expected to repeat that assertion at Mr. Bankman-Fried’s trial, which is expected to last four or five weeks. Much of the trial will revolve around messages that Mr. Bankman-Fried and the three cooperators exchanged on the messaging app Signal, two people briefed on the matter said.

As a girl within the male-dominated crypto trade, Ms. Ellison might seem extra sympathetic to the jury than the opposite cooperators, legal professionals conversant in the case mentioned. In interviews final yr, Mr. Bankman-Fried shifted some blame for the collapse to Alameda, saying he had little involvement within the hedge fund’s day-to-day administration.

Moira Penza, a former federal prosecutor, said that the best government cooperators accepted blame on the witness stand and that the “power differential” between Ms. Ellison and Mr. Bankman-Fried could make her a compelling voice.

“This does not strike me as an effective strategy for the defendant to be blaming down,” Ms. Penza said. “Especially with someone who was once a romantic partner.”