Caroline Ellison loved Harry Potter growing up and read the second book at age five – on her own.
Caroline Ellison on Twitter
“I refused to wait for my parents to read it [to me],” she said.
Ellison told 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, FTX’s now disgraced sister company.
Both companies were founded by Sam Bankman-Fried, a child prodigy turned alleged fraudster, who was arrested in the Bahamas in mid-December and placed on Wednesday night — and is now being sued by entities like the U.S. Securities and Exchange Commission and the Southern District of New York, with sentences of up to 115 years in prison.
Related: Who is FTX founder Sam Bankman-Fried and what did he do? Everything you need to know about the nefarious crypto king
Now Ellison is facing charges herself: She pleaded guilty to seven charges, including charges of wire fraud, SDNY U.S. Attorney Damian Williams announced via a tweeted video Wednesday night.
Statement by U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz
— U.S. Attorney SDNY (@SDNYnews) December 22, 2022
Gary Wong, a co-founder of FTX, also pleaded guilty to four charges, Williams said.
“Both Ms. Ellison and Mr. Wong have pleaded guilty to these 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 move forward,” he said.
In the fall of 2021, with Bitcoin trading at a sky-high $57,000, Ellison, who had joined the team as a trader in 2018, became the 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 on crypto regulation and positioned herself 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 in moving customer deposits from FTX to cover Alameda’s financial problems. Before the charge New York magazine named Ellison a “possible accomplice to what could be the biggest financial fraud in history.”
It could all 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-esque intern business podcast episode in July 2020, discussing her background and upbringing.
She said she grew up mostly in Newton, just outside Boston. Her parents are economics professors: Glenn Ellison, an economics professor at the Massachusetts Institute of Technology (MIT), and Sara Fischer Ellison, also a lecturer at the prestigious university, per CoinDesk.
Ellison said in the episode that she inherited a natural aptitude for math and entered math competitions at a young age. She studied math at Stanford. After applying to trade internships on a whim – a notorious one competitive process – she got one from Jane Street Capital, a Striking company on Wall Street (a company that had stayed out of the limelight before all this), and later worked there full-time for a year and a half.
What is Alameda Research?
Bankman fried Founded which became his portfolio of crypto companies in 2017, starting with Alameda.
Bankman-Fried had started Alameda Research in 2017 as a kind of high-risk, high-reward crypto trading company, using tactics such as arbitrage — he even said he called it “research” to give it a better vibe — in 2017, using the relatively “wild west” like crypto environment, according to NPR.
Bankman-Fried expanded into more complex crypto trading accessible to more people with the creation of FTX, a crypto exchange, in 2019, capitalizing on its image of being highly experienced in crypto, raising funds from high flyers like BlackRock, per NPR.
How did Caroline Ellison meet Sam Bankman-Fried?
There are reports that Ellison Met Bankman Fried on Jane Street. He worked there from June 2014 to September 2017, according to his LinkedInwhich (as of writing) is still live.
Ellison said she got to know Alameda over coffee with then-CEO Bankman-Fried while visiting the Bay Area and decided “it seemed like too cool an opportunity to pass up.” Ellison joined the company in 2018.
Finally Bankman-Fried resigned as CEO of Alameda, but he remained 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 accept 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 had “bought a boat”.
What happened to FTX and Alameda?
But it turns out things were pretty chaotic behind the scenes. Positioning itself as a white knight, FTX bought flailing competitor Voyager Digital as the crypto world felt rising interest rates and a subsequent tech stock revolution.
Related: ‘My apologies. That is the most important.’ Sam Bankman-Fried and Cryptoworld Lose Big in FTX Meltdown, Company Files for Bankruptcy.
Then CoinDesk reported that Alameda was highly dependent on power issued by FTX (which had essentially no independent value) which led to customer panic – and the whole house of cards came crashing down.
It turned out that FTX had loaned Alameda user deposits to cover its risky crypto transactions. This would be like Venmo loaning money from clients to a hedge fund it was linked to to cover stock bets. It is highly inappropriate to say the least.
Related: ‘A complete failure of corporate control’: FTX Corporate attacks Sam Bankman-Fried in bankruptcy filing
Speaking of the firms’ financial processes in general, current FTX CEO John Ray III, who is guiding the company through the bankruptcy process, said, “Never in my career have I seen such a complete failure of corporate controls.”
Related: FTX CEO John Ray earns $1,300 an hour to lead the disgraced crypto exchange through bankruptcy
What was Caroline Ellison’s relationship with Sam Bankman-Fried?
There have been rumors of polyamory, a relationship style involving connections with more than one person, in the Bahamas among FTX executives, where the company is based and where Bankman-Fried and Ellison lived, by CoinDesk.
“All 10 are, or were, paired up in romantic relationships with each other,” the outlet wrote.
He is now put in prison there in a facility notorious for overcrowding and unsanitary conditions.
As Insider noted, in Tumblr blogs linked to Ellison, one user posted about group relationship styles (as well as the aversion to social justice culture and thinking women are bad at math). There have also been suggestions that FTX employees and Bankman-Fried have spent lavishly on the island, from yachts to thousands of dollars a day on catering.
Will Caroline Ellison be charged? Where is she now?
Ellison pleaded guilty to seven charges, including conspiracy to commit wire fraud, carrying a maximum sentence of 110 years, according to the agreement. She will also pay the legal damages, which will be determined later.
She must also relinquish all possessions acquired during these crimes – and will cooperate with the investigation.
The SEC’s complaint provides more information about Ellison’s role in the scheme.
By the Wall Street Journal, the SEC has claimed the right to regulate FTT by classifying it as a security (the SEC said most crypto assets are securities). As such, it outlined several issues perpetrated by Ellison.
By the WSJEllison manipulated the price of an FTX token so that Alameda could use it as collateral for the loans it took from customers at FTX.
The agency also said Ellison knew how and actively participated in using FTX client funds to cover Alameda’s shortfalls.
Prior to this, she was briefly discussed in SEC documents related to the arrest of Bankman-Fried. “While meeting with Alameda employees on or about November 9, 2022, Ellison admitted that she, Bankman-Fried, Wang and Singh knew that customer FTX funds had been used by Alameda,” the complaint read.
Bloomberg also previously reported that Ellison took on legal representation – Stephanie Avakian, an ex-SEC official who focused on crypto at the company William Hale, citing people familiar with the matter. Indeed, the company represented her in her plea deal.
Twitter users claimed to have seen Ellison earlier this month at a cafe in New York.
