Who Is Caroline Ellison, Stanford Grad and Former CEO of Alameda Research? Ellison joined the Alameda team as a trader in 2018 and became its co-CEO in 2021. She now faces seven counts related to fraud and money laundering.
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Caroline Ellison loved Harry Potter growing up and read the second book at age five — by herself.
"I refused to wait for my parents to read it [to me]," she said.
Ellison recounted that story in a (now-private) podcast episode published in July 2020 on FTX's YouTube channel. At the time, she was a trader at Alameda Research, the now-disgraced sister company to FTX.
Both companies were created by wunderkind-turned-alledged-fraudster, Sam Bankman-Fried, who was arrested in the Bahamas in mid-December and was extradited to the U.S. on Wednesday night – and now faces charges from entities including the U.S. Securities and Exchange Commission and the Southern District of New York, with years in prison up to 115.
Now Ellison herself is facing charges: She pleaded guilty to seven counts including charges of wire fraud, U.S. Attorney Damian Williams of the SDNY announced via Tweeted video Wednesday night.
Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz— US Attorney SDNY (@SDNYnews) December 22, 2022
Gary Wang, a co-founder of FTX, also pleaded guilty to four counts, Williams said.
"Both Ms. Ellison and Mr. Wang have plead guilty to those charges, and they are both cooperating with the Southern District of New York," he added.
He reiterated his call for anyone involved in the alleged misconduct to come forward.
"Now is the time to get ahead of it," he said.
In the fall of 2021, when Bitcoin was trading at a sky-high $57,000, Ellison, who had joined the team in 2018 as a trader, became its co-CEO, (along with Sam Trabucco who later left the company in August 2022) per Bloomberg.
Ellison wasn't a publicity fiend like Bankman-Fried — who testified to Congress about crypto regulation and positioned himself as crypto's "elder statesman" (as Mary Childs of NPR's Planet Money put it) — but Ellison's SEC complaint made it clear she was involved with moving around customer deposits from FTX to cover Alameda's financial issues. Prior to the charges, New York Magazine called Ellison a "possible accomplice in what could be the biggest financial fraud in history."
It all could be a lesson in the dangers of wand-waving. Here's what we know about Ellison.
Who Is Caroline Ellison?
Ellison chatted with another FTX employee, Tristan Yver, for a public relations-type internal company podcast episode in July 2020, and discussed her background and upbringing.
She said she primarily grew up in Newton, just outside of Boston. Her parents are economics professors: Glenn Ellison, a professor of economics at Massachusetts Institute of Technology (MIT), and Sara Fischer Ellison, also a lecturer at the prestigious university, per CoinDesk.
Ellison said on the episode that she inherited a natural aptitude for math and entered math competitions at a young age. She went on to major in math at Stanford. After applying to trading internships on a whim — a notoriously competitive process — she snagged one at Jane Street Capital, a high-profile firm on Wall Street (a firm that had managed to stay out of the spotlight prior to all of this), and later worked there full-time for a year and a half.
What is Alameda Research?
Bankman-Fried founded what became his portfolio of crypto companies in 2017, starting with Alameda.
Bankman-Fried had started Alameda Research as a sort of high-risk, high-reward crypto trading firm, using tactics like arbitrage — he even said he called it "research" to give it a better vibe — back in 2017, taking advantage of the relatively "wild west"-like crypto environment, according to NPR.
Bankman-Fried expanded into more complex crypto trading accessible to more people with the founding of FTX, a crypto exchange, in 2019, leveraging his image as highly experienced in crypto, raising money from high fliers like BlackRock, per NPR.
How did Caroline Ellison meet Sam Bankman-Fried?
Ellison said she learned about Alameda over coffee with then-CEO Bankman-Fried while visiting the Bay Area and decided "it seemed like too cool of an opportunity to pass up." Ellison joined the company in 2018.
Eventually, Bankman-Fried resigned as CEO of Alameda, but he stayed CEO of FTX. In October 2021, Ellison became co-CEO with Sam Trabucco, a former trader at Susquehanna International Group. It is not yet known if he will take a deal like Ellison did.
Trabucco resigned in August 2022 to "spend a lot of time traveling," he wrote on Twitter, while also noting that he "bought a boat."
What happened to FTX and Alameda?
But it turns out things were pretty chaotic behind the scenes. FTX positioned itself as a white knight, buying flailing competitor Voyager Digital while the crypto world felt rising interest rates and a subsequent tech stock rout.
Then, CoinDesk reported that Alameda was heavily dependent on assets issued by FTX (which essentially lacked independent value) leading to customer panic — and the whole house of cards came falling down.
It turned out that FTX had been lending Alameda user deposits to cover its risky crypto trades. This would be like if Venmo lent customer money to a hedge fund that it was linked to to cover stock betting. It's highly improper, to say the least.
On the firms' financial processes in general, now-CEO of FTX John Ray III, who is shepherding the company through the bankruptcy process, said: "Never in my career have I seen such a complete failure of corporate controls."
What was Caroline Ellison's relationship with Sam Bankman-Fried?
There have been rumors of polyamory, a relationship style that involves connections with more than one person, in the Bahamas among FTX executives, where the company is based and where Bankman-Fried and Ellison lived, per CoinDesk.
"All 10 are, or used to be, paired up in romantic relationships with each other," the outlet wrote.
He is now imprisoned there in a facility notorious for crowding and unsanitary conditions.
As Insider noted, in Tumblr blogs linked to Ellison, a user has posted about group relationship styles (as well as takes about disliking social justice culture and thinking women are bad at math). There have also been suggestions that FTX employees and Bankman-Fried spent lavishly on the island, from yachts to thousands of dollars a day on catering.
Is Caroline Ellison facing charges? Where is she now?
Ellison pleaded guilty to seven counts of charges that include conspiracy to commit wire fraud, with a maximum sentence of 110 years, per the agreement. She will also pay the court restitution, which will be determined later.
She must also give up any assets obtained in the course of these crimes — and will cooperate with the investigation.
The SEC's complaint provides further details on Ellison's role in the scheme.
Per the Wall Street Journal, the SEC has claimed the right to regulate FTT by classifying it as a security (the SEC has said most crypto assets are securities). As such, it outlined various issues perpetrated by Ellison.
Per the WSJ, Ellison manipulated the price of an FTX-owned token so Alameda could use it as collateral for the loans it took out from customers at FTX.
The agency also said Ellison knew about how and actively participated in using FTX customer funds to cover Alameda's shortfalls.
Prior to this, she was discussed briefly in SEC documents related to Bankman-Fried's arrest. "During a meeting with Alameda employees on or about November 9, 2022, Ellison admitted that she, Bankman-Fried, Wang, and Singh were aware that FTX customer funds had been used by Alameda," the complaint says.
Bloomberg also previously reported that Ellison took on legal representation — Stephanie Avakian, an ex-SEC official focused on crypto at the firm WilmerHale, citing people familiar with the matter. The firm indeed represented her in her plea deal.
Twitter users claimed to have spotted Ellison at a cafe in New York earlier this month.