She's the star witness against Sam Bankman-Fried. Her testimony was explosive

Caroline Ellison, the former girlfriend of Sam Bankman-Fried and a top executive in his crypto business empire, has long loomed as the government's star witness in the ongoing trial of the disgraced founder of FTX.

And over a day-and-a-half of testimony in a Manhattan court, she delivered.

In testimony on Tuesday and Wednesday that got tearful at times, Ellison accused Bankman-Fried of being behind the mastermind behind a concerted effort to steal billions of dollars from customers, investors, and lenders.

And as Bankman-Fried's former girlfriend, she had intimate knowledge of both the company and of the former crypto celebrity who now faces seven criminal charges that could send him to prison for the rest of his life.

Here are five takeaways from Ellison's explosive testimony.

Painting Bankman-Fried as the mastermind

Prosecutors are trying to prove Sam Bankman-Fried engineered and orchestrated a massive fraud.

He is accused of misusing billions of dollars in FTX customer money by directing the funds to Alameda Research, an investment firm that Bankman-Fried founded before FTX, and that Ellison eventually ran.

Although Bankman-Fried's lawyers are justifying the transfer of funds as legitimate loans, prosecutors are seeking to paint it as fraud, arguing FTX customer money was used to plug financial holes at Alameda, as well as to make speculative investments, and to finance Bankman-Fried's lavish lifestyle.

In her testimony, Ellison sought time and time again to portray Bankman-Fried as the decision maker at the company she says she only nominally ran.

Ellison described Bankman-Fried as being "the one who set up the systems that allowed Alameda to take the money, and he was the one who directed us to take customer money to repay our loans."

Though Ellison was Alameda Research's CEO, she described her role as frustrating. She didn't get a raise when she was promoted, she said, and Bankman-Fried continued to make key decisions even after he left Alameda formally to focus on FTX.

"I handled a lot of day-to-day decisions and responsibilities in Alameda," she testified. "But for any major decisions, I would always run them by Sam, and I would always defer to Sam if he thought that we should do something."

When the prosecution asked her to explain why she was so deferential, Ellison noted there was always a difficult power dynamic between her and Bankman-Fried.

"I would say the whole time that we were dating, he was also my boss at work, which created some awkward situations," she said.

Describing Bankman-Fried's willingness to gamble

In her testimony, Ellison also painted Bankman-Fried as willing to take an extraordinary amount of risk with FTX's funds.

Ellison recalled Bankman-Fried's affection for games of chance — and his tolerance for risk. For example, she remembered how he once talked about being willing to lose $10 million if he drew tails in a coin flip — as long as he had the chance to win more than $10 million if he drew heads.

Bankman-Fried took that same approach to running his businesses, Ellison said.

She described how, in 2021, Bankman-Fried wanted Alameda to spend $3 billion on a series of speculative investments in start-up companies. She was charged with modeling how an investment of that size could affect Alameda's balance sheet.

Ellison found that the $3 billion investment, as conceived, "would put Alameda in a significantly riskier position and make it much less likely or almost impossible that we would be able to pay off our loans if all of our loans were called at once."

Ellison presented those results to Bankman-Fried, and suggested that the proposed investment would be too risky given the state of Alameda's finances. But Ellison said Bankman-Fried ordered her to go through with it.

Manipulating balance sheets

Ellison described Alameda's financial position as increasingly precarious as 2022 unfolded.

She was stressed, Ellison said, and detailed how she conferred with Bankman-Fried about the balance sheet at Alameda, noting growing problems with the company's ability to pay back loans.

"This was a time of crisis for Alameda," Ellison told the court.

It was during this time period that Ellison says she and Bankman-Fried began to take even more money from FTX customers to pay back Alameda's loans. It was, she said, "the only option on the table."

In 2022, by late summer, Alameda had funneled more than $14 billion from FTX customers — all without their knowledge or consent.

"We were in a bad situation," she said.

At several times during her testimony, Ellison said Bankman-Fried directed her to manipulate spreadsheets to make Alameda's financial picture look more favorable and to ignore requests from lenders for additional information.

Over and over again, she said she did what Bankman-Fried asked her to do.

According to Ellison, when an executive at Genesis — which had provided Alameda with hundreds of millions of dollars in loans — asked for an updated balance sheet, Bankman-Fried "suggested I should find some alternate ways to present the information."

So Ellison created seven different options, and she said Bankman-Fried advised her to send a version that minimized the size of Alameda's debts, while playing up the worth the firm's holdings of FTT, a cryptocurrency Bankman-Fried created.

Ellison also said she disguised nearly $5 billion in personal loans Bankman-Fried and several deputies received.

As a downturn in the cryptocurrency market deepened in 2022, Alameda's situation worsened.

As Bankman-Fried and his deputies worked behind the scenes to find ways to pay back billions of dollars in loans owed by Alameda, Bankman-Fried was making public pronouncements that were at odds with what was really happening. On social media, for example, he claimed his businesses were fine.

Trying desperately to raise funds

As panic grew among the top ranks of FTX, Bankman-Fried talked a lot about how he could raise more money from lenders and investors, Ellison testified.

She said Bankman-Fried talked repeatedly about trying to get money from Mohammed bin Salman, the Crown Prince of Saudi Arabia. The plan, as she detailed it, was to use money from Saudi Arabia to pay back Alameda's lenders. But that funding never materialized.

By the fall of 2022, Ellison said, she and other executives at the company were holding onto hope, however blindly, that they could secure additional financing from someone, or that the price of cryptocurrencies would go up. That, she said, would lift up the value of the assets on Alameda's books.

"I was in a state of dread," she said.

Ultimately, however, FTX and Alameda collapsed, and in short order, FTX declared bankruptcy and Bankman-Fried was arrested. Days later, Ellison pleaded guilty to several criminal charges and agreed to cooperate with federal prosecutors in their case against Bankman-Fried.

Ellison's testimony also shed light on another incident that could land Bankman-Fried in more trouble.

In early 2021, a Chinese cryptocurrency exchange froze Alameda's trading account, and the firm lost access to approximately $1 billion in assets.

For months, Bankman-Fried tried to regain access to those assets through a variety of methods. Ellison testified how colleagues at Alameda set up accounts on the Chinese exchange tied to the identities of Thai prostitutes, hoping they could somehow use them to siphon the money away from the frozen account.

Ultimately, Ellison said, Alameda transferred $100 million in payments to what she understood to be Chinese government officials to unfreeze the account, which could constitute a bribe.

Ellison described a meeting in which a colleague whose father worked for the Chinese government protested repeatedly. Ellison said Bankman-Fried screamed at the employee to "shut the f--- up."

Judge Lewis Kaplan, who's presiding over the trial, allowed the use of that testimony "for limited purposes," — to demonstrate "the trust and confidence" Ellison and Bankman-Fried had in each other.

But Kaplan also made clear to jurors that an allegation of bribing a foreign official is not one of the charges in this trial. But at a separate trial, expected to take place next year, Bankman-Fried will face charges of bribery and bank fraud.

Why Ellison's testimony matters

Though other former top executives at FTX businesses are testifying during the trial, Ellison was always considered the most important witness.

After prosecutors first called her to the witness stand, everyone stood and faced the two wooden doors at the back of Judge Kaplan's courtroom. Moments later, Ellison was led down the center aisle to the witness stand.

When the prosecution asked Ellison if she could identify Sam Bankman-Fried for the jury, Ellison stood and squinted, and scanned the room. It took almost a minute for her to locate him.

It has been almost a year since Ellison pleaded guilty to several criminal charges, including counts of fraud and conspiracy, and agreed to cooperate with the U.S. government in its multi-count case against Bankman-Fried.

She is hoping for leniency in exchange, when she is sentenced after this trial ends.

The daughter of M.I.T. economists, Ellison was a math major at Stanford University, and in her testimony, she described how she and Bankman-Fried met at the trading firm Jane Street. She was an intern, and he was a trader.

Before long, the defendant started his own crypto-focused investment firm, called Alameda Research, and Bankman-Fried convinced Ellison to join its ranks. But their relationship wasn't strictly personal.

In 2018, she and Bankman-Fried "started sleeping together on and off," Ellison told the court. And "in the summer of 2020, we eventually started a romantic relationship."

Over the course of TK hours of testimony, she described in detail personal and professional ups and downs, and the conspiracy of which she has admitted to being an integral part.

"When you were working at Alameda, did you commit any crimes?" the prosecution asked Ellison.

"Yes," she said. "We did."