"Sam told me to."
That was the common response from Caroline Ellison, the former CEO of Alameda Research, who continued her testimony against Sam Bankman-Fried in Manhattan federal court on Wednesday.
In addition to being her boss, Bankman-Fried, the CEO of FTX and the owner of Alameda, FTX's sister company, was also Ellison's on-again-off-again boyfriend. He directed her repeatedly to deceive Alameda's lenders into believing both companies were better off than they really were, Ellison testified.
"I was in a constant state of dread. I knew we'd have to take the money from our FTX line of credit, which could be called in at any time," Ellison said Wednesday.
Previous testimony from FTX executives centered on the $65 billion line of credit Alameda had at FTX, allowing the hedge fund unlimited access to FTX's pockets.
Around May 2022, as Alameda continued to borrow from FTX, Ellison said the cryptocurrency market experienced a downturn, as did Alameda's assets. As the situation worsened, Bankman-Fried requested more frequent updates on Alameda from Ellison, who shared balance sheets with her boss. Despite the troubling outlook, Ellison said, Bankman-Fried directed her to continue using FTX customer's assets and other liquid assets to repay Alameda's lenders.
Ellison said she was unnerved by the notion of taking money that belonged to FTX customers, testifying that she "thought it was wrong" but followed Bankman-Fried's instructions nonetheless.
"If a large number of customers decided to withdraw all at once, FTX wouldn't have enough to repay them," Ellison testified. "I was very freaked out. We were talking about billions of dollars."
One lender in particular, a crypto trading firm called Genesis, messaged Ellison recalling some of their loans. They also asked to view Alameda's financial reports, some of which Ellison admitted to forging at Bankman-Fried's direction.
As evidence, government prosecutors pulled up one balance sheet that had seven variations to it, which Ellison created after Bankman-Fried told her to find "alternative ways of presenting the balance sheet" to Genesis.
"I was concerned because if anyone found out, everything would come crashing down," Ellison said, adding that she lived with the "constant worry of people finding out or FTX customers withdrawing all at once."
Despite her concerns, Bankman-Fried "continued to direct me to repay the loans" that Alameda owed to lenders, Ellison said. When pressed, she added that she "understood that to mean he was telling me to use Alameda's line of credit at FTX."
"It was Sam's decision," she said.
With tears in her eyes, Ellison described the November 2022 bankruptcy of FTX and Alameda as the "worst week of my life" filled with "mood swings."
As all of her worst fears came to fruition, she said she felt an "overwhelming feeling of relief" that the "truth had finally come out."
"I think I just had an increasing dread of this day that was weighing on me for a long time and now that it's actually happening it just feels great to get it over with," Ellison wrote in a Signal message to Bankman-Fried on November 7, 2022. A screen shot of the message was shown to the jury Wednesday.
Bankman-Fried's response in several separate messages said, "wow," "uh," "congrats?" "because shit's exciting?"
Ellison said, despite their difficult relationship, she shared her thoughts with Bankman-Fried.
"I didn't feel I had anyone else to share it with because I had been trying to keep it secret for so long," Ellison testified.
In December 2022, Ellison met with the FBI after authorities searched her parents' home where she was residing and confiscated her phone, computer, and journal.
"When the truth finally came out, I just felt a sense of relief. I just didn't have to lie anymore," Ellison testified, before tearfully adding, "I wanted to be honest and take responsibility for what I had done."
