1.Caroline Ellison — Direct (Part 2)
1,042 linesUNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------x UNITED STATES OF AMERICA, v. 22 CR 673 (LAK) SAMUEL BANKMAN-FRIED, Defendant. Trial
New York, N.Y. October 11, 2023 9:35 a.m. Before: HON. LEWIS A. KAPLAN, District Judge APPEARANCES DAMIAN WILLIAMS United States Attorney for the Southern District of New York BY: DANIELLE R. SASSOON NICOLAS ROOS DANIELLE KUDLA SAMUEL RAYMOND THANE REHN Assistant United States Attorneys COHEN & GRESSER, LLP Attorneys for Defendant BY: MARK S. COHEN CHRISTIAN R. EVERDELL SRI K. KUEHNLENZ DAVID F. LISNER Also Present: Luke Booth, FBI Kristin Allain, FBI Arjun Ahuja, USAO Paralegal Specialist Grant Bianco, USAO Paralegal Specialist
(In open court; jury not present)
JUDGE KAPLAN: Good morning, everyone. Under the heading of old business, you will have an order on the defense motion for reconsideration that was filed about a week or so ago probably within a very short period of time. With respect to the government's application to exclude evidence concerning the value of the investment in Anthropic, I don't propose to rule on that until the end of the direct. And the defense application concerning cross-examination with respect to the involvement of attorneys——this being on Ms. Ellison——I'm not going to rule on that until the end of the direct. So I think we're ready to go. Let's get the jury. And the witness.
(Continued on next page)
(Jury present)
JUDGE KAPLAN: Good morning, everybody. The jurors and the defendant are present, as they have been throughout. Ms. Ellison, you are still under oath. And Ms. Sassoon, you may continue.
MS. SASSOON: Thank you, your Honor. CAROLINE ELLISON, resumed.
DIRECT EXAMINATION BY MS. SASSOON:
MS. SASSOON: Good morning, Ms. Ellison.
CAROLINE ELLISON: Good morning.
MS. SASSOON: When we left off yesterday, we were talking about May of 2022, and I want to pick up there.
MS. SASSOON: Mr. Bianco, if you could pull back up Government Exhibit 49A, which we were looking at yesterday afternoon. And if you could scroll to the second page back to where it talks about your worries and questions.
MS. SASSOON: Just to be clear, the comment bubble on the side where it says Sam Bankman-Fried, "Yup, and could also get worse," who wrote that?
CAROLINE ELLISON: That was written by Sam.
MS. SASSOON: And around this time——we could take that down——in May of 2022, what happened around then in the cryptocurrency markets?
CAROLINE ELLISON: There was a——an overall downturn in the cryptocurrency markets, sort of precipitated by the crash of the coin Luna, but spreading to other coins in crypto as well.
MS. SASSOON: And when you say a downturn, what does that mean?
CAROLINE ELLISON: That means the prices of all, most——or most of all cryptocurrencies went down a lot.
MS. SASSOON: So how does that affect the value of Alameda's assets?
CAROLINE ELLISON: It made the value of our assets go down a lot, as they were mostly in cryptocurrency.
MS. SASSOON: What about Alameda's trading positions; what happened with those around this time?
CAROLINE ELLISON: Sorry. What's the distinction between trading positions and assets?
MS. SASSOON: Apart from coins, the trading that Alameda was doing on various exchanges.
CAROLINE ELLISON: The day-to-day trading that we were doing during this time was profitable.
MS. SASSOON: And after the value of many of Alameda's cryptocurrency coins went down, what kinds of conversations, if any, were you having with the defendant about Alameda's assets and balances?
CAROLINE ELLISON: He started asking for a lot more frequent updates on Alameda's positions. I was sharing balance sheets and, yeah, talking about Alameda's assets and liabilities.
MS. SASSOON: How did the downturn in the cryptocurrency market affect the billions of dollars in loans that Alameda had around this time from third-party lenders like Genesis?
CAROLINE ELLISON: They started to be recalled a bit after the market downturn, so mostly starting in the middle of June.
MS. SASSOON: So in the middle of June, when lenders were recalling loans, what does it mean that they were recalling loans?
CAROLINE ELLISON: It means that they were asking Alameda to pay the loans back.
MS. SASSOON: And under the terms of the loans, was Alameda obligated to repay those loans?
CAROLINE ELLISON: Yes, we were.
MS. SASSOON: Why is that?
CAROLINE ELLISON: Because the majority of our loans were open-term loans, meaning that the lenders could ask for them back at any time and Alameda would have to repay.
MS. SASSOON: How did you learn about Alameda's third-party lenders asking for their money back?
CAROLINE ELLISON: A variety of sources. Some was from messages on Slack from other Alameda employees, some was from being in Telegram groups or in calls directly with lenders.
MS. SASSOON: What is Telegram?
CAROLINE ELLISON: Telegram is a messaging platform that was widely used by cryptocurrency companies.
MS. SASSOON: Was the defendant also on some of these Telegram communications with Alameda's lenders in mid-June?
CAROLINE ELLISON: Yes, he was.
MS. SASSOON: Your Honor, at this time I'd ask permission to approach the witness with a few printed exhibits, and I have a copy for the Court and defense counsel as well.
JUDGE KAPLAN: Yes. Thank you.
MS. SASSOON: Ms. Ellison, I'm handing you Government Exhibits 1647, 1648, 1649, and 1650, and if you could take a look at those and let me know if you recognize them.
CAROLINE ELLISON: Yes, I do. These are all chats with employees at Genesis.
MS. SASSOON: And are these over Telegram?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: And are these some of the chats that you mentioned a moment ago having with lenders about Alameda's loans in mid-June?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: The government offers Government Exhibits 1647, 1648, 1649, and 1650.
MR. COHEN: Your Honor, may we be heard at the sidebar.
JUDGE KAPLAN: Okay.
(Continued on next page)
(At the sidebar)
MR. COHEN: Your Honor, we have no objection to all of the exhibits except as to 1647, the first one. It's a chain, Telegram chain between people from the lender and other people at Alameda that Ms. Ellison was not on. So we have no objection to it being offered not for its truth, but she's not part of it.
JUDGE KAPLAN: She seems to be on it.
MR. COHEN: But she's not in the discussion tree that leads up to the question.
MS. SASSOON: May I be heard.
JUDGE KAPLAN: Sure.
MS. SASSOON: These were taken from Ms. Ellison's phone. She's a participant in the chat group, as is the defendant, and this includes discussions asking for money back, which goes to the defendant's knowledge as well as to subsequent actions taken by the defendant and Ms. Ellison.
MR. COHEN: If I might, that's a response on relevance, not on hearsay. There was no foundation that she——we're asking for this——
MS. SASSOON: The defendant is on the chats.
JUDGE KAPLAN: Is any of this offered for the truth?
MS. SASSOON: She will say that she then repaid the lenders the money, but the chat itself is not necessary for the truth as much as its effect on the defendant and Ms. Ellison.
JUDGE KAPLAN: So why not?
MR. COHEN: Would your Honor give an instruction to that effect?
JUDGE KAPLAN: I will.
MR. COHEN: Okay. Then of course.
JUDGE KAPLAN: Okay.
(Continued on next page)
(In open court)
JUDGE KAPLAN: Government Exhibits 1648, 1649, 1650 are received for all purposes. Government Exhibit 1647 is received not for the truth of statements made in it but for the fact that they came to the attention of Ms. Ellison and for whatever relevance they have to what she thereafter did. Any objection to the instruction?
MR. COHEN: No, your Honor.
JUDGE KAPLAN: Okay. That's the limited——
MS. SASSOON: Your Honor, I would add there are other participants on the chat and it's relevant to what they subsequently did as well.
JUDGE KAPLAN: I amend my statement to the jury. That's correct.
(Government's Exhibits 1647, 1648, 1649, and 1650 received in evidence)
JUDGE KAPLAN: Okay. Go ahead.
MS. SASSOON: Mr. Bianco, please publish Government Exhibit 1647.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, is that a Telegram chat?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: And what is the date of this Telegram chat group?
CAROLINE ELLISON: The date of these messages is on June 13, 2022.
MS. SASSOON: And generally who is part of this group? I see a number of names at the top, but generally who are these folks?
CAROLINE ELLISON: These are either Alameda employees or affiliates or Genesis employees.
MS. SASSOON: And were you a participant in this chat?
CAROLINE ELLISON: Yes, I was.
MS. SASSOON: What about the defendant?
CAROLINE ELLISON: Yes, he is.
MS. SASSOON: Directing your attention to the first message on June 13, 2022, who is Dan Gleim?
CAROLINE ELLISON: He was an employee at Genesis.
MS. SASSOON: Can you please read that message.
CAROLINE ELLISON: It says, "hey, team - for USD return, we can take USDC here," and gives an address, "or send to 7955."
MS. SASSOON: What is a USD return?
CAROLINE ELLISON: That means that he's asking for us to return some of our US dollar loans from Genesis.
MS. SASSOON: And that string of letters and numbers, what is that?
CAROLINE ELLISON: That's a cryptocurrency address.
MS. SASSOON: If we could turn to page 2, Mr. Bianco.
MS. SASSOON: And can you read the top message from Matt Ballensweig. Who is Matt Ballensweig?
CAROLINE ELLISON: He was the head of lending at Genesis.
MS. SASSOON: If you could read that.
CAROLINE ELLISON: It says, "hey, guys - seeing a fair amount of continued outflows from retail deposit aggregators, so to get ahead of this, we're going to increase the OT loan pullback to $400 million. Can you please let us know once the first batch and second batch are sent. Do we have an ETA on the first 250 million?"
MS. SASSOON: What is an OT loan?
CAROLINE ELLISON: That refers to open-term loans, so these are loans that Genesis could call from us at any time.
MS. SASSOON: And what is an OT loan pullback to 400 million?
CAROLINE ELLISON: That means they're asking in this message for us to return $400 million of our open-term loans with them.
MS. SASSOON: And was this one of the loans that Alameda was obligated to repay, if asked?
CAROLINE ELLISON: Yes, it was.
MS. SASSOON: Taking this down, did you get similar messages from other lenders around this time?
CAROLINE ELLISON: Yes, we did.
MS. SASSOON: And Mr. Bianco, if you could publish Government Exhibit 1648.
MS. SASSOON: Ms. Ellison, is this another message between you and some individuals at Genesis?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: And if you could zoom in, Mr. Bianco, on Ms. Ellison's message at the bottom dated June 14, 2022.
MS. SASSOON: Can you read that message.
CAROLINE ELLISON: It says, "Just want to add, really appreciate you guys working with us on this. Unsurprisingly have been getting loans called from everyone across the board but obviously want to help you guys out assuming we can get all our other obligations squared away."
MS. SASSOON: And when you said "have been getting loans called from everyone across the board," what are you referring to?
CAROLINE ELLISON: I'm referring to our open-term loans with other lenders.
MS. SASSOON: And what was happening with those?
CAROLINE ELLISON: They were getting called in addition to the Genesis loans.
MS. SASSOON: We can take that down.
MS. SASSOON: What was your reaction to third-party lenders all asking for their money back around the same time in mid-June?
CAROLINE ELLISON: I was very stressed out, and we were talking about billions of dollars, and I knew that Alameda had lost a lot of money in the cryptocurrency market downturn and we didn't have the liquid assets to pay all of the money back and that we would have to be taking money from FTX.
MS. SASSOON: When you say "we would have to be taking money from FTX," what do you mean?
CAROLINE ELLISON: I mean in order to repay all of our loans, we would have to borrow money using our FTX line of credit.
MS. SASSOON: And whose funds would that be?
CAROLINE ELLISON: That would be coming from customer funds.
MS. SASSOON: During this time did you attempt to calculate whether Alameda had the ability to repay its lenders with the money that Alameda had?
CAROLINE ELLISON: Yeah, I did. I was regularly making updated balance sheets in similar calculations.
MS. SASSOON: And what did your calculations show about whether Alameda could repay its lenders?
CAROLINE ELLISON: They showed that we did not have enough liquid assets to repay all of our lenders.
MS. SASSOON: And why didn't Alameda have enough liquid assets to repay its lenders?
CAROLINE ELLISON: Because we had used a lot of them for loans and investments, and a lot of our assets had gone down in value with the cryptocurrency market downturn.
MS. SASSOON: When you say you had used some of it for loans, I just want to clarify, what loans are you talking about?
CAROLINE ELLISON: I'm talking about loans to——to Sam, Gary, Nishad, and other entities owned by Sam.
MS. SASSOON: How would you describe your mental state when you realized that Alameda had billions of dollars to repay and it didn't have the money?
MR. COHEN: Objection.
MS. SASSOON: Your Honor, her mental state is relevant.
JUDGE KAPLAN: Why isn't it, Mr. Cohen?
MR. COHEN: I thought we were talking about the mental state of the defendant in this case, your Honor.
JUDGE KAPLAN: Well, we are, of course.
MS. SASSOON: Your Honor, there are charges of conspiring with others.
JUDGE KAPLAN: Do you have an answer to that, Mr. Cohen?
MR. COHEN: Your Honor, other than my prior objection, I have nothing further on that.
JUDGE KAPLAN: Overruled.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, I'll ask you again: What was your mental state when you realized that Alameda had billions of dollars in loans to repay and that it didn't have the money?
CAROLINE ELLISON: I was in sort of a constant state of dread at that point. I——I knew that we would have to take the money from our FTX line of credit and I knew that that was money that could be called at any time, and every day, I mean, I was worrying about the possibility of customer withdrawals from FTX and the possibility of this getting out and what would happen to people that would be hurt by that.
MS. SASSOON: When you say you would have to take money from the line of credit and that could be called at any time, can you just explain what you meant by that, "called at any time."
CAROLINE ELLISON: What I mean that, when we were taking money from this FTX line of credit, this was coming from FTX customers, and FTX customers had the ability to withdraw their money at any time, so I knew that if a large number of customers decided to withdraw their funds all at once, that FTX wouldn't have enough money to cover that.
MS. SASSOON: At this time did you share information with the defendant that showed that Alameda did not have the money to repay its lenders?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained. Form.
MS. SASSOON: You just described calculating Alameda's balances, which I believe you testified showed Alameda did not have money to repay its lenders.
CAROLINE ELLISON: Yes.
MS. SASSOON: Were you sharing this information about Alameda's balances with the defendant?
CAROLINE ELLISON: Yes, I was.
MS. SASSOON: What did you share with him?
CAROLINE ELLISON: I shared updated balance sheets whenever he asked for them and information about things like Alameda's account balances on FTX, which he asked for.
MS. SASSOON: So was he asking for this information?
CAROLINE ELLISON: Yes.
MS. SASSOON: And why were the two of you sharing this type of information around mid-June?
CAROLINE ELLISON: Because, I mean, he was my boss; he was the owner of Alameda. This was a time of crisis for Alameda; this was an extremely big problem for us; it was an important thing for us to be discussing.
MS. SASSOON: What did the defendant tell you to do, if anything, when you showed him Alameda's balances?
CAROLINE ELLISON: He continued to direct me to repay loans.
MS. SASSOON: When the defendant directed you to repay loans after looking at your analysis of Alameda's balances, what did you understand the defendant to be telling you to do?
CAROLINE ELLISON: I understood that he was telling me to borrow money using our FTX line of credit to repay loans when they were called.
MS. SASSOON: And when you say you understood him to be telling you to use Alameda's line of credit on FTX, can you spell out what you mean.
CAROLINE ELLISON: I understood that he was telling me to use FTX customer funds to repay our loans.
MS. SASSOON: And why was that your understanding?
CAROLINE ELLISON: Because I had shared Alameda's balance sheet information with him that showed that that was the only source of capital large enough to repay all of our loans. We also had, you know, had many discussions in the past about using this FTX line of credit for various Alameda purposes, including discussions about using it as a——a backstop if our loans were called, so I——yeah, I considered that to be the most reasonable and really the only option on the table.
MS. SASSOON: So what did you do when the defendant told you to repay its lenders despite Alameda's balances?
CAROLINE ELLISON: I continued to direct the Alameda settlement team to repay lenders.
MS. SASSOON: Using what money?
CAROLINE ELLISON: Using FTX customer assets in addition to Alameda's other liquid assets that we had.
MS. SASSOON: Over what time period did you repay Alameda's lenders?
CAROLINE ELLISON: A lot of it was in June, and there continued to be loan recalls over the next few months as well.
MS. SASSOON: In the course of the defendant telling you to repay these loans, did you also analyze Alameda's overall balances on FTX?
CAROLINE ELLISON: Yeah, we did.
MS. SASSOON: Why did you do that?
CAROLINE ELLISON: Sam asked us to put together a spreadsheet showing Alameda's balances on FTX.
MS. SASSOON: You said "Sam asked us." Who's "us"?
CAROLINE ELLISON: Me, Gary, and Nishad.
MS. SASSOON: Mr. Bianco, if you could just pull up Government Exhibit 1803. And that's already in evidence. And this can be published.
MS. SASSOON: Who is this?
CAROLINE ELLISON: That's Nishad.
MS. SASSOON: You can take that down. And now, Mr. Bianco, can you please pull up Government Exhibit 50, which is already in evidence, and which the parties have stipulated is a document called Alameda Balances by FTX Sub dated June 13, 2022.
MS. SASSOON: So June 13th, is that the day of the messages from Genesis asking for the loans?
CAROLINE ELLISON: Yeah, which would be the same day.
MS. SASSOON: And what is it that we're looking at here?
CAROLINE ELLISON: This is a spreadsheet with a few tabs that Sam asked me, Gary, and Nishad to put together. The first two tabs both show Alameda's balances on various FTX accounts that we owned.
MS. SASSOON: And this first sheet, Sheet 1, who put this together?
CAROLINE ELLISON: That was me.
MS. SASSOON: And just to be clear, column C, what is that showing?
CAROLINE ELLISON: That shows the email of the account.
MS. SASSOON: And column A?
CAROLINE ELLISON: That's Alameda's internal name for the account.
MS. SASSOON: And Mr. Bianco, can you please highlight the column marked Balances and expand the sum of this column in the lower right-hand corner.
MS. SASSOON: What did you calculate was the total balance of Alameda's account on FTX? And we can wait a moment. We'll pull that back up.
CAROLINE ELLISON: Yeah. In this sheet the balances add up to about negative $20 billion.
MS. SASSOON: So before Alameda had repaid its lenders, this is showing Alameda already owed FTX about $20 billion?
CAROLINE ELLISON: Yes, that's what this sheet shows, but I knew that to be incorrect at the time because there was a large bug in the FTX fiat balances that it wasn't accounting for.
MS. SASSOON: Let's take a look at that. What is the FTX fiat account?
CAROLINE ELLISON: That's the account I think I mentioned earlier where, when FTX customers would deposit like US dollars into Alameda bank accounts, there would be an offsetting ledger entry in an FTX account. This was that account. So this is to track Alameda's fiat liabilities to FTX.
MS. SASSOON: Mr. Bianco, can you highlight row 6 of this sheet. Sorry, row 5.
MS. SASSOON: Is that the fiat account?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: And what number is being shown here for the fiat account?
CAROLINE ELLISON: Negative 19 billion.
MS. SASSOON: And so is that the number you said was not correct?
CAROLINE ELLISON: That's right.
MS. SASSOON: And how did you learn it wasn't correct?
CAROLINE ELLISON: I was told that there was a large bug in this calculation of this number by Gary during a meeting with Sam, Gary, and Nishad.
MS. SASSOON: And Mr. Bianco, can you highlight row 6 of this sheet.
MS. SASSOON: What is the FTX account?
CAROLINE ELLISON: That was Alameda's main trading account on FTX.
MS. SASSOON: And how much borrowing from FTX does this show on Alameda's main trading account?
CAROLINE ELLISON: It shows about $3 billion.
MS. SASSOON: Is that through the line of credit?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: And is this before Alameda had repaid all of its lenders?
CAROLINE ELLISON: That's right.
MS. SASSOON: So before Alameda had repaid its lenders, how much had Alameda already borrowed from FTX customers through the line of credit?
CAROLINE ELLISON: About $3 billion.
MS. SASSOON: Let's take a look at Sheet 2. Do you recall who put this sheet together?
CAROLINE ELLISON: I think it was Gary and/or Nishad. I'm not sure which one.
MS. SASSOON: And Mr. Bianco, if you could highlight rows 13 and 14.
MS. SASSOON: What does this show about Alameda's fiat liability?
CAROLINE ELLISON: The first row has a similar negative 19 billion as my sheet, but the second row has the correction from the bug, which is about $8 billion.
MS. SASSOON: And what does this show about the size of Alameda's liability to FTX customers for their dollar deposits once the bug was corrected?
CAROLINE ELLISON: It shows that it was around negative $11 billion.
MS. SASSOON: Mr. Bianco, can you highlight the information in columns I and J of this sheet.
MS. SASSOON: What does this sheet show about the total liability on all of Alameda's FTX accounts once fixing the bug?
CAROLINE ELLISON: It shows that it was around negative $10 billion.
MS. SASSOON: And did you discuss this spreadsheet with the defendant?
CAROLINE ELLISON: Yeah, we did.
MS. SASSOON: And so this shows that around the time that loans are being recalled, Alameda owed about $10 billion?
MR. COHEN: Objection.
JUDGE KAPLAN: What's the objection?
MR. COHEN: Leading.
JUDGE KAPLAN: Sustained. Answer stricken.
MS. SASSOON: Once the figures in this spreadsheet were calculated, what, if anything, did the defendant tell you to do with respect to the continuation of repaying Alameda's loans?
CAROLINE ELLISON: He directed me to continue repaying Alameda's loans.
MS. SASSOON: And how did you continue to repay Alameda's loans?
CAROLINE ELLISON: By taking money from various sources, including FTX customer funds as well as our other liquid assets.
MS. SASSOON: We've talked about the customer deposits in Alameda's bank accounts and the line of credit. Which of these methods was used to repay Alameda's lenders in June?
CAROLINE ELLISON: I think it was a combination of them.
MS. SASSOON: So were you——so was Alameda using the line of credit?
CAROLINE ELLISON: Yes.
MS. SASSOON: And what was the other combination of methods?
CAROLINE ELLISON: I was saying I think we also used some money in bank accounts as well.
MS. SASSOON: Government Exhibit 50 has an additional tab called Balance Sheet By Liquidity.
MS. SASSOON: Mr. Bianco, can you please bring up Tab 3.
MS. SASSOON: Who made this tab?
CAROLINE ELLISON: This was made by me.
MS. SASSOON: Why did you prepare this tab?
CAROLINE ELLISON: Sam asked me to put together some information on our balance sheet and categorize it by how liquid the assets were.
MS. SASSOON: And around when did you prepare this?
CAROLINE ELLISON: I think it was around the same time as the first two tabs, maybe a bit later.
MS. SASSOON: On the left-hand side, is that a balance sheet for Alameda?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: Mr. Bianco, can you zoom in on columns D and E, liquid liabilities.
MS. SASSOON: Do you see where it says "FTX borrows, 13250"?
CAROLINE ELLISON: Yeah.
MS. SASSOON: First of all, what number does that represent?
CAROLINE ELLISON: That represents 13.25 billion.
MS. SASSOON: And 13.25 billion what?
CAROLINE ELLISON: Dollars.
MS. SASSOON: And what are FTX borrows that correspond to this $13.25 billion number?
CAROLINE ELLISON: That represents money that Alameda was borrowing from FTX customers.
MS. SASSOON: By the way, we saw this term "FTX borrows" here and on a spreadsheet we looked at yesterday. Why did you call money being taken from customers "FTX borrows" in your spreadsheet?
CAROLINE ELLISON: I guess I wanted to strike a balance of identifying what it was, but, I mean, I didn't want to say explicitly something like FTX customer money.
MS. SASSOON: And why didn't you want to say explicitly in a spreadsheet FTX customer money?
CAROLINE ELLISON: Because Sam always directed us to be careful about what we put in writing and not put things in writing that might get us in legal trouble.
MS. SASSOON: And did you consider putting something like "FTX customer money" in that category?
CAROLINE ELLISON: Yeah, I did.
MS. SASSOON: So according to this spreadsheet, at the time that you made it, around mid-June, how much money had Alameda borrowed from FTX customers at that point?
CAROLINE ELLISON: Around $13 billion.
MS. SASSOON: I want to look at another part of this spreadsheet.
MS. SASSOON: And Mr. Bianco, if you could zoom in and include columns G through L, rows 3 through 10, and please include the column numbers, column letters.
MS. SASSOON: Before we look at the specific numbers here, can you explain what you were analyzing.
CAROLINE ELLISON: This was analyzing the total customer assets on FTX and how much of that Alameda was borrowing and how much was left on FTX.
MS. SASSOON: Sorry. I didn't hear what you said at the end.
CAROLINE ELLISON: Sorry. The last part was how much Alameda was borrowing and how much was left on FTX.
MS. SASSOON: When you say "how much was left on FTX," what do you mean?
CAROLINE ELLISON: Like how many assets FTX still held in its bank accounts and in its cryptocurrency wallet.
MS. SASSOON: So let's take this piece by piece. I want to look at column G, which starts with USD. What is this column?
CAROLINE ELLISON: That column has various fiat currencies and cryptocurrencies.
MS. SASSOON: So what is USD, for example?
CAROLINE ELLISON: US dollars.
MS. SASSOON: And what is BTC?
CAROLINE ELLISON: Bitcoin.
MS. SASSOON: What about the next column, column H, which says FTX minus Alameda?
CAROLINE ELLISON: That refers to the total customer assets that had been deposited on FTX, not counting Alameda's balances.
MS. SASSOON: And so by this time how much US dollar currency had customers deposited on FTX?
CAROLINE ELLISON: This was $13 billion.
MS. SASSOON: And what about Bitcoin?
CAROLINE ELLISON: About $3 billion.
MS. SASSOON: Where did you get this information for your spreadsheet?
CAROLINE ELLISON: I asked either Gary or Nishad. I don't remember who.
MS. SASSOON: And why would you have asked Gary and Nishad for this information?
CAROLINE ELLISON: Because it wasn't information that I had access to, but I wanted to confirm that, like, their numbers lined up with my numbers for how much I thought Alameda was borrowing from FTX.
MS. SASSOON: Let's look at column I, which says "FTX." What are the numbers in this column?
CAROLINE ELLISON: Those are the total assets that were held by FTX at the time.
MS. SASSOON: And so at the time how much US dollars, for example, had customers deposited versus how much was available for them on FTX?
CAROLINE ELLISON: They had deposited $13 billion, and only $3 billion was available on FTX.
MS. SASSOON: And what about Bitcoin?
CAROLINE ELLISON: Bitcoin, they deposited about——they had deposited $2.9 billion and it was——2.17 billion was left on FTX.
MS. SASSOON: So taking dollars as an example, if customers had deposited $13 billion and 3 billion was left, what had happened to that remaining $10 billion?
CAROLINE ELLISON: The other $10 billion had been borrowed by Alameda.
MS. SASSOON: And is that reflected in this spreadsheet?
CAROLINE ELLISON: Yes, that's in the next column, column J.
MS. SASSOON: And so can you explain what we're looking at with these negative numbers in column J.
CAROLINE ELLISON: So column J shows how much of each currency Alameda had borrowed from FTX.
MS. SASSOON: And so using dollars as an example again, how much US dollars had Alameda borrowed at that point of FTX customer money?
CAROLINE ELLISON: $10 billion.
MS. SASSOON: And what about Ethereum? That's the third one listed here.
CAROLINE ELLISON: That was $800 million.
MS. SASSOON: Column K, do you know what those percentages are?
CAROLINE ELLISON: Yeah. That's showing what percentage of the total FTX customer assets Alameda had borrowed.
MS. SASSOON: So let's take the example of BRZ, which is second from the bottom. What is BRZ?
CAROLINE ELLISON: I think a stablecoin that tracks the Brazilian real.
MS. SASSOON: And how much of customers' BRZ had Alameda taken off FTX?
CAROLINE ELLISON: This spreadsheet shows it had taken a hundred percent.
MS. SASSOON: After you put together these numbers did you calculate how much money actually remained for customers in total on the FTX exchange at this point in time?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Mr. Bianco, can you zoom out and zoom in on columns D and E, row 13.
MS. SASSOON: What is this?
CAROLINE ELLISON: That's my calculation of the total amount of money that was available to FTX customers at the time, so it's saying that it was $6.8 billion.
MS. SASSOON: And when you say the total amount of money available to FTX customers, what do you mean by that?
CAROLINE ELLISON: I mean the total assets that are remaining on FTX, either in its bank accounts or in its cryptocurrency wallets.
MS. SASSOON: If you could zoom out, Mr. Bianco.
MS. SASSOON: We saw in column H more than $15 billion of customer money that had been deposited with FTX. What happened to all that money apart from the remaining 6.8 billion?
CAROLINE ELLISON: It had been taken by Alameda.
MS. SASSOON: And to be clear, is this before Alameda had repaid all of its lenders?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: Mr. Bianco, within the same sheet, can you display rows 16 through 40, which are at the bottom. And Mr. Bianco, can you please zoom in on rows 35 and 36, where it says negative 3 billion, and continue to the right.
MS. SASSOON: What are these numbers?
CAROLINE ELLISON: These were, I mean, very rough estimates, but just my attempts to estimate what was the probability of enough withdrawals from FTX at one time that FTX would run out of money and how that would change depending on whether Alameda made or lost money.
MS. SASSOON: And did these calculations assume all the customers withdrawing their money at once or something else?
CAROLINE ELLISON: No. This was assuming the probability of all customers withdrawing at once was pretty unlikely.
MS. SASSOON: And is that factored into your calculations?
CAROLINE ELLISON: Yeah.
MS. SASSOON: And so under Alameda's current circumstances when you made this spreadsheet, what did you calculate was the probability of not being able to satisfy FTX customer withdrawals?
CAROLINE ELLISON: I was guessing it was 13 percent.
MS. SASSOON: And what if Alameda went negative by another $3 billion?
CAROLINE ELLISON: My guess was it went up to 21 percent.
MS. SASSOON: Did you share this spreadsheet with the defendant?
CAROLINE ELLISON: Yeah.
MS. SASSOON: And how did you share it with him?
CAROLINE ELLISON: I think over Signal.
MS. SASSOON: If we could zoom out and take this down.
MS. SASSOON: This spreadsheet showed about——or you testified that this showed about $6.8 billion of customer assets remaining on the exchange, and you testified about your calculation of odds of being unable to meet customer withdrawals. Were those facts and predictions concerning to you?
CAROLINE ELLISON: Yeah, they were extremely concerning. I was——yeah, really worried that FTX customers would try to withdraw a bunch of money at once and that we wouldn't be able to process those withdrawals.
MS. SASSOON: How did the concerns you had in mid-June compare to the concerns you expressed having in May 2022 when you described Alameda's leveraged position in that document to the defendant?
CAROLINE ELLISON: I mean, they were much worse at that point. In May 2022, it was more like I was concerned that if the crypto market went down that we would be in a bad situation, whereas in June 2022, we were in the bad situation and I was mostly concerned that if anyone would find out, everything would come crashing down.
MS. SASSOON: So why, given all that, did you proceed to use customer money to repay Alameda's lenders?
CAROLINE ELLISON: Because——I mean, because Sam told me to and because I thought that if Alameda just defaulted on its loans and went bankrupt right away, that would be really bad, and if we used customer money, at least there was some chance that we would be able to fix things somehow, that maybe Sam would be able to raise money to repay our loans.
MS. SASSOON: What was your view at the time about whether what you were doing was wrong?
CAROLINE ELLISON: Yeah, I thought it was wrong.
MS. SASSOON: And from mid-June onward what happened to the concerns you were having?
CAROLINE ELLISON: They continued. I mean, not——not much materially really changed over the next few months. The crypto market didn't go back up and we didn't find any new sources of capital, so I continued to live with the constant worry of——of people finding out or of FTX customers withdrawing too much money at once.
MS. SASSOON: We looked at a chat from June 13, 2022, with Genesis. Through that week of June 13, 2022, about how much money did Alameda repay to its third-party lenders?
CAROLINE ELLISON: I think it was a few billion dollars; maybe in the ballpark of 5.
MS. SASSOON: And did that include through the use of FTX customer money?
CAROLINE ELLISON: Yeah.
MS. SASSOON: And over the next two months or so, about how much money did Alameda repay its lenders?
CAROLINE ELLISON: It was another few billion dollars.
MS. SASSOON: And so was that money Alameda was borrowing on top of the borrows we saw from June 13th?
MR. COHEN: Objection, leading.
JUDGE KAPLAN: Sustained. Form.
MS. SASSOON: How did the money, the billions of dollars used to repay lenders, compare to the figures we looked at from June 13, 2022?
CAROLINE ELLISON: We were continuing to repay lenders and borrow more money from FTX on top of the money that we were already borrowing.
MS. SASSOON: And who made this decision to repay Alameda's lenders throughout this period with FTX customer money?
CAROLINE ELLISON: It was Sam's decision.
MS. SASSOON: Who oversaw the process of actually making the payments to the lenders?
CAROLINE ELLISON: I mean, I——I directed the settlement team to make the payments.
MS. SASSOON: Yesterday we looked at Government Exhibit 36, NAV minus Sam coins.
MS. SASSOON: And Mr. Bianco, if you could pull up that exhibit, the second tab called Questions.
MS. SASSOON: Can you remind the jury when you prepared this analysis that we looked at yesterday.
CAROLINE ELLISON: I prepared this in the fall of 2021.
MS. SASSOON: And looking at rows 30 to 32, did this analysis include what might happen in a bad market event?
CAROLINE ELLISON: Yes, it did.
MS. SASSOON: And did you analyze what would happen if Alameda made an additional $3 billion of investments?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: How did this hypothetical scenario of a market downturn compare to what was happening now in June of 2022?
CAROLINE ELLISON: It was pretty similar. There was a market downturn and we had in fact made several billion dollars more of investments.
MS. SASSOON: What did your analysis here that you shared with the defendant assume about how to repay loans in that circumstance?
CAROLINE ELLISON: It assumed that we would use customer deposits on FTX to repay loans if we ran out of other liquid assets.
MS. SASSOON: We looked at this yesterday. Your analysis here said that if you made an additional $3 billion of investments——
MR. COHEN: Objection. Asked and answered.
MS. SASSOON: I didn't finish the question, your Honor.
JUDGE KAPLAN: Yes, I'm quite aware of that. Thank you.
MR. COHEN: I will withdraw the objection until the question is completed. I apologize.
BY MS. SASSOON:
MS. SASSOON: Where it says "P (we can't meet that)," your analysis here shows a prediction that there was a hundred percent chance of not being able to repay your loans. Was that the case in June 2022, after these additional venture investments?
MR. COHEN: Now I'll make the objection.
JUDGE KAPLAN: Yes, sustained.
MS. SASSOON: Well, I might have to reask some prior questions, your Honor, to get to the new question.
MS. SASSOON: Can you remind us what is referenced here where it says "P (we can't meet that)," a hundred percent?
MR. COHEN: Same objection.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: This is the probability that we would be unable to repay our loans if we were called——if they were called, and at the time I said that in this scenario the probability would be a hundred percent.
MS. SASSOON: Can you remind us, "this scenario," what scenario is that?
CAROLINE ELLISON: The scenario of Alameda making $3 billion of additional investments and there being a large market downturn.
MS. SASSOON: And had Alameda made additional venture investments?
CAROLINE ELLISON: Yeah.
MS. SASSOON: And had the market gone down?
CAROLINE ELLISON: Yeah.
MS. SASSOON: But you testified that you repaid the loans. So what changed?
CAROLINE ELLISON: The main change from this scenario that I had modeled previously was that FTX had had several billion dollars more of customer deposits so there was a lot more money that we could take from FTX to repay the loans than I had expected.
MS. SASSOON: In your conversations with the defendant about repaying lenders, did he identify any other new sources of capital for repaying loans other than new FTX customer deposits?
CAROLINE ELLISON: No. I mean, he talked about hypothetically raising more funds for FTX or something, but he didn't identify any actually existing sources of capital.
MS. SASSOON: And just to be clear, when he talked about raising money, was any money raised for FTX at the time you were repaying these loans?
MS. SASSOON: Mr. Bianco, can you publish Government Exhibit 1649.
MS. SASSOON: What is the date of these Telegram messages with Matt Ballensweig?
CAROLINE ELLISON: These are on June 18, 2022.
MS. SASSOON: Can you remind us, who is Matt Ballensweig?
CAROLINE ELLISON: He was the head of lending at Genesis.
MS. SASSOON: Mr. Bianco, can you please highlight or zoom in on the three messages at the bottom.
MS. SASSOON: Can you please read the message from Matt Ballensweig.
CAROLINE ELLISON: He says, "anything you guys can provide to help show a more updated view of equity/balance sheet etc. would be helpful."
MS. SASSOON: And the next message?
CAROLINE ELLISON: "Hey there - looking to see if we can some m2m of balance sheet from you guys. Would be helpful for us to bring more capital into space."
MS. SASSOON: What did you respond?
CAROLINE ELLISON: I said, "makes sense, will see what I can put together."
MS. SASSOON: What's "m2m of balance sheet"?
CAROLINE ELLISON: "m2m" stands for mark to market, so that means our balance sheet with assets valued at the current market prices.
MS. SASSOON: When you said, "will see what I can put together," what are you referring to putting together?
CAROLINE ELLISON: A balance sheet to send to Genesis.
MS. SASSOON: What was your reaction to getting a request from Genesis on June 18th for a balance sheet at that time?
CAROLINE ELLISON: I was very stressed out. I thought that I——it wouldn't be a good idea to ignore them, and I——I wanted to reassure them about Alameda's financial state, but the facts were that Alameda was in a very bad situation that we were——had very risky positions on and that we had been borrowing increasing amounts of money from FTX customers, and I didn't want Genesis to know any of that.
MS. SASSOON: Did you discuss your concerns with the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And at first where did you discuss your concerns with him?
CAROLINE ELLISON: In a group meeting with him, Gary, and Nishad.
MS. SASSOON: Where was that meeting?
CAROLINE ELLISON: It was——I don't remember if it was in the office or in our apartment.
MS. SASSOON: And where were you living at that time?
CAROLINE ELLISON: In the Bahamas.
MS. SASSOON: And did he sometimes have work meetings in your apartment?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What was discussed at the meeting?
CAROLINE ELLISON: We discussed Alameda's most recent balance sheet, and I asked what I should say to Genesis, and Sam gave some suggestions.
MS. SASSOON: What kinds of suggestions did the defendant give you about Alameda's balance sheet?
CAROLINE ELLISON: He suggested that the people in that meeting could give our personal Serum tokens to Alameda to put on the balance sheet and that we could put his holdings of FTX equity in the Paper Bird entity on the balance sheet.
MS. SASSOON: If you followed the defendant's suggestions, what effect would that have on the balance sheet?
CAROLINE ELLISON: It would make our assets look larger.
MS. SASSOON: After this meeting what did you do?
CAROLINE ELLISON: I went back and prepared a balance sheet.
MS. SASSOON: And did you make changes to the balance sheet?
CAROLINE ELLISON: Not initially. Initially I just prepared a——a——yeah, normal balance sheet.
MS. SASSOON: And what did you do then?
CAROLINE ELLISON: I sent it to Sam and said, This is our balance sheet, I think it looks bad, I don't think we can send this to Genesis. Do you agree? And he said, Yeah, that sounds right.
MS. SASSOON: Why did you think the balance sheet looked bad and couldn't send it to Genesis?
CAROLINE ELLISON: Overall it showed that Alameda was in a very risky position. It showed that we were borrowing, you know, around $10 billion from FTX, and that we had about $5 billion of loans to FTX executives and to affiliated entities.
MS. SASSOON: Just to be clear, why did you care what Genesis thought of your balance sheet?
CAROLINE ELLISON: I didn't want them to recall the rest of our loans. I was also worried that they would share the information with other people in the crypto markets and that might cause more widespread concern about Alameda and could even cause people to start withdrawing their money from FTX.
MS. SASSOON: And so at this time did Alameda still have some loans from Genesis?
CAROLINE ELLISON: Yeah, we did.
MS. SASSOON: So when you shared the balance sheet with the defendant, how did you share it with him?
CAROLINE ELLISON: Over Signal.
MS. SASSOON: And when the defendant agreed with you that the balance sheet didn't look good, what happened next in the conversation?
CAROLINE ELLISON: He suggested that I should prepare some alternative ways of presenting the information and send them to him.
MS. SASSOON: And when the defendant told you to come up with alternative ways of presenting the information in your balance sheet, what did you understand that to mean?
CAROLINE ELLISON: I understood him to be directing me to come up with ways to conceal the things in our balance sheet that we both thought looked bad.
MS. SASSOON: So what did you do?
CAROLINE ELLISON: I prepared a spreadsheet with seven different alternative balance sheets that we could send.
MS. SASSOON: And what was the goal of preparing seven different balance sheets?
CAROLINE ELLISON: I wasn't sure what the best thing to send to Genesis would be. I didn't really want to be dishonest, but I also didn't want them to know the truth, so I just thought I'd prepare a variety of things and ask Sam what he wanted to do.
MS. SASSOON: What kinds of alterations were you making to the balance sheet in these various alternatives?
CAROLINE ELLISON: Some were doing things like combining categories so that it wasn't obvious that some of our assets were being used as collateral or combining FTT with other cryptocurrencies; other tabs were netting out assets against liabilities to make our overall leverage and risk look lower.
MS. SASSOON: Mr. Bianco, can you show the witness what's been marked as Government Exhibit 44.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, this is the spreadsheet I was just talking about with the seven alternatives.
MS. SASSOON: The government offers Government Exhibit 44, which the parties have stipulated is a document called Rough Balance Sheet 6/20/22, and is dated June 19, 2022.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government's Exhibit 44 received in evidence)
MS. SASSOON: Mr. Bianco, if you could bring up Government Exhibit 44 for the jury.
BY MS. SASSOON:
MS. SASSOON: And right now we're on the first tab called "main." And before we look at each tab, or some tabs, what is this spreadsheet overall?
CAROLINE ELLISON: This spreadsheet, the main tab is our——the sort of initial balance sheet that I prepared, and then the other tabs are the seven alternatives that I came up with at Sam's direction.
MS. SASSOON: So this main tab, is this an internal version of Alameda's balance sheet?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: And is this the one you were concerned about sharing with Genesis?
CAROLINE ELLISON: That's right.
MR. COHEN: Objection. Leading.
JUDGE KAPLAN: Sustained.
MS. SASSOON: How does this tab relate to the balance sheet you were just talking about?
CAROLINE ELLISON: This is the same balance sheet I was just talking about that I sent to Sam and I said I was concerned with——about sharing with Genesis.
MS. SASSOON: Where it says at the top, in column B, "all numbers in millions," what does that mean?
CAROLINE ELLISON: That means all of the numbers here are in millions. For instance, the bank balances, when it says 525, that means $525 million.
MS. SASSOON: And how, if at all, is the money that Alameda had used from FTX customers that you testified about reflected on this balance sheet?
CAROLINE ELLISON: It's in the liabilities section under "exchange borrows."
MS. SASSOON: And so for "exchange borrows," what's the total there?
CAROLINE ELLISON: $9.9 billion.
MS. SASSOON: And so what does that $9.9 billion represent?
CAROLINE ELLISON: That means that Alameda had borrowed $9.9 billion from FTX customers.
MS. SASSOON: How did you feel about having $9.9 billion of money that Alameda had used from FTX on your balance sheet?
MR. COHEN: Objection.
JUDGE KAPLAN: Ground? Ground?
MR. COHEN: Oh, I'm sorry. Leading.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: Sorry. Could you ask the question again?
MS. SASSOON: Yes. How did you feel about having $9.9 billion of borrows from FTX customers on Alameda's balance sheet?
CAROLINE ELLISON: Not good. I mean, I think it——it made it clear that Alameda was in a risky situation because if customers tried to withdraw those funds, then we wouldn't be able to pay them back. It also made FTX look very bad if this got out, and people would be concerned about keeping their money on FTX.
MS. SASSOON: Looking at this balance sheet, "exchange borrows" is in row 5, which is the row for liquid liabilities. Why is the money Alameda owes to FTX customers categorized as a liquid liability?
CAROLINE ELLISON: What I meant by that was that these were loans that could be called at any time, so the open-term loans are liquid liabilities because the lenders could call them at any time, and similarly, the exchange borrows could be withdrawn by FTX customers at any time.
MS. SASSOON: So you referenced the open-term loans. Is that the number beneath "exchange borrows"?
CAROLINE ELLISON: Yes, that's right, where it says "OT loans."
MS. SASSOON: So at this point in time how much money in loans did Alameda still have from third parties?
CAROLINE ELLISON: We had $1.8 billion in open-term loans remaining and $2.9 billion in fixed-term loans.
MS. SASSOON: You mentioned fixed-term loans. That's in row 17, which is categorized as long-term liabilities. What's the difference between the liquid liabilities and the long-term?
CAROLINE ELLISON: Long-term liabilities were liabilities that we wouldn't have to ever pay back right away, so the fixed-term loans were typically terms of around three months, that we would have three months before we needed to pay them back.
MS. SASSOON: On the assets side of this balance sheet, there's also categories of liquid assets and long-term assets. Why does the balance sheet distinguish between liquid assets and long-term assets?
CAROLINE ELLISON: Liquid assets were things that we could sell easily, they were things that were, like, publicly traded on exchanges, whereas the long-term assets were, like, private investments, things that we would have to, you know, go out and find a buyer for that we couldn't just sell on an exchange.
MS. SASSOON: Mr. Bianco, if you could highlight column C, rows 5 through 10, which is the liquid assets, and expand the sum in the lower right-hand corner.
MS. SASSOON: What does this balance sheet show was the total of Alameda's liquid assets at the time?
CAROLINE ELLISON: It shows the total was around 7 billion, though even the liquid assets category here is including FTT, which was not actually very liquid, so 7 billion is probably an overstatement.
MS. SASSOON: Can you explain why $7 billion, in your view, overstated Alameda's liquid assets.
CAROLINE ELLISON: Because the liquid category contains $3 billion of FTT, and if you tried to sell that $3 billion of FTT, you wouldn't be able to get anything close to $3 billion, so if we wanted to use it to repay loans, we wouldn't——we wouldn't actually get $3 billion from them.
MS. SASSOON: So in an event that all of FTX's customers wanted to withdraw their money, what does this balance sheet show about whether Alameda had the money to meet those withdrawals?
CAROLINE ELLISON: It shows that we did not.
MS. SASSOON: And why is that?
CAROLINE ELLISON: Because there's $9.9 billion that we're borrowing from FTX and less than 7 billion——maybe more like 5 billion——of liquid assets that we could use for those withdrawals.
MS. SASSOON: I want to zoom out. You'll see here that there's a liquid category for assets and then there's a category called collateral, and both categories have FTT. Can you explain the difference between the liquid FTT and the collateral FTT.
CAROLINE ELLISON: Yeah. Liquid FTT was FTT that we were just holding on exchanges or in wallets. The collateral FTT was being used to collateralize our third-party loans.
MS. SASSOON: So the assets listed here under collateral, would those have been available to pay FTX customers?
CAROLINE ELLISON: No. Those were being held by our lenders in wallets that we couldn't access.
MS. SASSOON: Mr. Bianco, could you zoom out again and show the entire main sheet.
MS. SASSOON: Do you see——I want to focus now on row 17, where it says "long-term assets related party loans," and it says, 4591.
MS. SASSOON: And Mr. Bianco, if you could highlight that.
MS. SASSOON: First of all, 4591, what's that number?
CAROLINE ELLISON: That means $4.591 billion.
MS. SASSOON: And so what does that $4½ billion number represent?
CAROLINE ELLISON: That represents our related-party loans, so that's loans to Sam, Gary, Nishad, and other entities that are related to Alameda or owned by Sam.
MS. SASSOON: And in preparing the balance sheet that Genesis had asked for, how did you feel about having about $4.5 billion in related-party loans on your balance sheet?
CAROLINE ELLISON: Not good. I thought that it made it clear that Alameda was in a risky situation because these loans weren't loans that we could easily call if we needed them to repay our other loans, and it also might make it look like Alameda was effectively giving or funneling money to FTX executives.
MS. SASSOON: And you touched on this, but did you view these loans as available assets to repay what Alameda owed FTX customers?
CAROLINE ELLISON: No, I did not.
MS. SASSOON: Why?
CAROLINE ELLISON: Because I knew that they had been invested in various things, meaning that the, you know, the people or entities that had gotten the loans didn't have the cash on hand to repay.
MS. SASSOON: Let's zoom out and look at the bottom. What does this show about Alameda's total liabilities at the time?
CAROLINE ELLISON: It shows our total liabilities are around $15 billion.
MS. SASSOON: And let's look at the total assets. What are those?
CAROLINE ELLISON: Around $21 billion.
MS. SASSOON: What was your view on whether Alameda could actually sell all the assets listed here and raise $21 billion?
CAROLINE ELLISON: I didn't think that we would be able to do that unless there was a, you know, significant change, like the cryptocurrency market went up a lot.
MS. SASSOON: And why didn't you think you could liquidate these assets for $21 billion?
CAROLINE ELLISON: Because a lot of them were not very liquid, meaning that if you tried to sell a bit, the price would go down a lot; a lot of them were, you know, privately held, meaning that it would be somewhat hard to find buyers.
MS. SASSOON: Looking at the bottom, what is the total NAV calculated for Alameda?
CAROLINE ELLISON: $6.1 billion.
MS. SASSOON: And can you remind us, what is NAV?
CAROLINE ELLISON: It stands for net asset value, so that means the total value of our assets minus the total value of how much we owe.
MS. SASSOON: So if this is showing a NAV of positive $6 billion, why didn't you want to share this with Genesis?
CAROLINE ELLISON: Because it showed that a lot of what was making up that positive NAV was FTT and other illiquid assets, and it showed that Alameda was very exposed to the market and borrowing a lot from FTX.
MS. SASSOON: We can zoom out.
MS. SASSOON: We've looked at this main tab, which you said was the internal version. I see seven alternative tabs. What were you trying to do in each of those seven alternative tabs?
CAROLINE ELLISON: I was trying to come up with different ways to create the balance sheet so that it would look better for our lenders.
MS. SASSOON: And whose idea was that?
CAROLINE ELLISON: It was Sam's.
MS. SASSOON: How did the defendant communicate that to you?
CAROLINE ELLISON: He said something like, why don't you come up with some alternative ways of presenting the information in the balance sheet and send them to me.
MS. SASSOON: Which alternative, if any, was selected to share with Alameda's lenders?
CAROLINE ELLISON: Sam said that we should use alternative 7.
MS. SASSOON: So let's look at alternative 7.
MS. SASSOON: And Mr. Bianco, if you could bring up the tab labeled alternative 7.
MS. SASSOON: Is there any line item in this alternative selected by the defendant for FTX customer money or FTX borrows used by Alameda?
CAROLINE ELLISON: No, there is not.
MS. SASSOON: Is there any line item on this alternative for related-party loans of $4½ billion?
MS. SASSOON: So in this spreadsheet what happened to the $9.9 billion that Alameda owed to FTX customers?
CAROLINE ELLISON: Some of it was netted against the related-party loans number and the rest was put in the long-term loans category.
MS. SASSOON: So you said some of the money Alameda owed FTX customers was netted against the related-party loans. Can you explain what you meant by that.
CAROLINE ELLISON: Yeah, that means that I deleted the related-party loans and I also subtracted the same amount of money from the FTX borrows so that our NAV would remain the same but our total assets and total liabilities would both get lower.
MS. SASSOON: And you said some of the money Alameda owed to FTX customers was moved to the long-term loans category?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: So Mr. Bianco, can you highlight that in row——highlight all of row 17, please.
MS. SASSOON: So first of all, why is the $8.2 billion in loans no longer labeled "exchange borrows" or "FTX borrows"?
CAROLINE ELLISON: Because I didn't want Genesis or others to know that Alameda was borrowing a lot of money from FTX.
MS. SASSOON: And why has that amount of money been moved from the liquid liability category to a long-term loan?
CAROLINE ELLISON: Because when it was in the liquid liabilities category, it was clear from looking at our balance sheets that our balance sheet——that if all of our, you know, liquid liabilities were called, meaning that if all of the loans that could be called immediately were called, that we wouldn't have enough assets to repay them, and so moving it to long-term loans makes it look like we're in a safer position.
MS. SASSOON: You said moving it here makes it look like you're in a safer position. Was labeling the money Alameda owed to FTX customers a long-term loan accurate?
MS. SASSOON: Why not?
CAROLINE ELLISON: I mean, because there were no official terms that I was aware of for this loan, but FTX customers could try to withdraw the money at any time with, you know, few restrictions.
MS. SASSOON: What effect, if any, did moving the debt to FTX customers into the long-term loan category have on conveying the risk associated with that money that Alameda owed?
CAROLINE ELLISON: It made it look like the loan was safer than it actually was.
MS. SASSOON: You've also relabeled this debt from borrows to loans. Were you aware of any loan terms for this money that Alameda had taken from FTX customers?
CAROLINE ELLISON: No, I wasn't.
MS. SASSOON: Were you aware of any customers agreeing to loan out their money in this fashion?
MS. SASSOON: You said that you——we can zoom out——that you netted this number in part against the related-party loans. Did it make sense to treat the related-party loans as an offset to the money that Alameda owed to FTX customers?
CAROLINE ELLISON: No, because the loans weren't something that we could get back easily so it wasn't something that we could easily use to repay FTX customers if we needed to.
MS. SASSOON: I think you said that ultimately the NAV here is the same as in the main tab. Was that your testimony?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: So if the NAV of 6 billion is the same, what was the overall intended effect of the changes you just talked about?
CAROLINE ELLISON: The intended effect was to make Alameda look less risky than it really was and to hide the fact that we were borrowing around $10 billion from FTX customers.
MS. SASSOON: Mr. Bianco, I want to compare the main tab with alternative 7 from Government Exhibit 44, so can you bring them up side by side.
MS. SASSOON: We have the main tab on the left and alternative 7 on the right. How did the total liabilities compare in each of these balance sheets?
CAROLINE ELLISON: The liabilities go down from around $15 billion in the main tab to around $10 billion in alternative 7.
MS. SASSOON: And what was the intended effect of reporting overall lower liabilities?
CAROLINE ELLISON: To make Alameda look less risky.
MS. SASSOON: It looks to me like the liquid assets are the same; is that right?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: What about the liquid liabilities? How did they compare in each of these?
CAROLINE ELLISON: The liquid liabilities are much lower in alternative 7. It's only $1.8 billion compared to $12 billion.
MS. SASSOON: So if a lender looked at the alternative 7 balance sheet, what's conveyed here about whether Alameda had liquid assets to cover its liquid liabilities?
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained, form.
MS. SASSOON: In alternative 7, what is conveyed about whether Alameda had the liquid assets to cover its liquid liabilities?
CAROLINE ELLISON: Alternative 7 makes it look like we had plenty of liquid assets to cover our open-term loans.
MS. SASSOON: Was that true?
MS. SASSOON: Why not?
CAROLINE ELLISON: Because as you can see in the more accurate main tab, we had around $12 billion of liquid liabilities and more like 3 to $7 billion of liquid assets.
MS. SASSOON: You testified that you sent this to the defendant over Signal. What, if anything, did you say when you sent this to the defendant by Signal?
CAROLINE ELLISON: I said, Here are some alternative presentations I came up with for the balance sheet, and I explained roughly what I did in various tabs.
MS. SASSOON: And in substance, how did you describe what you had done in alternative 7?
CAROLINE ELLISON: I said I had netted out the exchange borrows against the related-party loans and then moved the rest to the long-term loans category.
MS. SASSOON: What did the defendant say?
CAROLINE ELLISON: He said that alternative 7 looked good and that I should send that one to Genesis.
MS. SASSOON: Once the defendant chose alternative 7, what did you do?
CAROLINE ELLISON: I sent it to Genesis.
MS. SASSOON: Why did you send it to Genesis?
CAROLINE ELLISON: Because Sam directed me to; because Genesis was asking for a balance sheet, and I needed to send something.
MS. SASSOON: Mr. Bianco, can you publish Government Exhibit 1650.
MS. SASSOON: What's the date of this Telegram message between you and Matt Ballensweig at Genesis?
CAROLINE ELLISON: This is on June 20, 2022.
MS. SASSOON: Looking at the first two messages, the second one says, "here you go," and above that there's a link. What is that link?
CAROLINE ELLISON: The link is to the——a Google Doc of the balance sheet that I sent them.
MS. SASSOON: What did Matt Ballensweig respond?
CAROLINE ELLISON: He said, "Thanks so much. Appreciate it. Just caught up with Sam, by the way. Let's keep in tight comms this week."
JUDGE KAPLAN: There are people who don't have any idea what a Google Doc is, and it might be useful for the witness to explain it now.
MS. SASSOON: Thank you, your Honor.
MS. SASSOON: Ms. Ellison, can you explain what a Google Doc is.
CAROLINE ELLISON: Yeah. So a Google Doc is a document or a spreadsheet that's kept on your Google account, so it's accessible online, and it can be shared with people and edited and commented on by other people online.
MS. SASSOON: Let's go to page 2. Can you read the first message on this page from Matt Ballensweig?
CAROLINE ELLISON: It says, "hey there - so spoke with Sam and I'm sure he filled you in—–wouldn't be pushing you guys here if it wasn't totally necessary but we want to unwind $500 million in 250 clips. If you guys can show us what that's going to cost, it would be helpful, but we're basically in that position where this is no longer a luxury."
MS. SASSOON: What does it mean to unwind 500 million in 250 clips?
CAROLINE ELLISON: That meant he wanted us to repay $500 million of our loans in $250 million at a time.
MS. SASSOON: And what's your understanding, if any, of the role that the balance sheet played in that request?
CAROLINE ELLISON: I'm not aware that it played any specific role. He told me that it was because of recalls that they were getting on their end.
MS. SASSOON: Can you just explain what you mean by recalls that Genesis was getting on their end.
CAROLINE ELLISON: It meant Genesis was——the money that they were lending us, they were borrowing from others, including retail lending platforms, and customers were withdrawing their money from those platforms, so Genesis had to have a way to fulfill those withdrawals, and that's why they needed their money back from us.
MS. SASSOON: This refers to speaking with Sam. What, if anything, did the defendant tell you about his call with Matt Ballensweig?
CAROLINE ELLISON: He told me that he talked to Matt and that Matt said that Genesis really needed the money and implied that they might go under or have to default on some loans if they didn't get it, so he said that we should make that happen but show them a reasonable price for it.
MS. SASSOON: Mr. Bianco, can you show the witness what's been marked as Government Exhibit 17.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What is it?
CAROLINE ELLISON: This is the balance sheet that I ended up sending to Genesis.
MS. SASSOON: The government offers Government Exhibit 17, which the parties have stipulated is a document called Rough Balance Sheet, June 19, 2022, dated June 19, 2022.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government's Exhibit 17 received in evidence)
MS. SASSOON: And Mr. Bianco, can you please publish Government Exhibit 17.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, what is this balance sheet?
CAROLINE ELLISON: This is the balance sheet that I sent to Matt Ballensweig at Genesis.
MS. SASSOON: And this is the document you shared via Google Docs?
CAROLINE ELLISON: That's right.
MS. SASSOON: And Mr. Bianco, let's bring this up, Government Exhibit 17, side by side with alternative 7 from Government Exhibit 44.
MS. SASSOON: Just to orient you, on the left-hand side we have Government Exhibit 17, which you said was the balance sheet you sent to Genesis, and on the right-hand side we have alternative 7. How did these two documents compare?
CAROLINE ELLISON: They're the same.
MS. SASSOON: Did the balance sheet sent to Genesis identify that Alameda had borrowed billions of dollars from FTX customers?
MS. SASSOON: And how did the total liabilities on this balance sheet compare to the internal version of your balance sheet?
CAROLINE ELLISON: The total liabilities on this one are only $10 billion, whereas the internal one had about $15 billion.
MS. SASSOON: Did you consider the financial information that you sent to Genesis to be dishonest?
CAROLINE ELLISON: Yes, I did.
MR. COHEN: Objection.
JUDGE KAPLAN: Overruled. A. Yes, I did consider it to be dishonest.
MS. SASSOON: Why?
CAROLINE ELLISON: Because it falsely stated the amounts of our actual assets and liabilities, and it——it hid the fact that we were borrowing $10 billion from FTX customers and made us look much safer than we actually were.
MS. SASSOON: You just testified that you sent what you thought was a dishonest balance sheet to Genesis. When you did that, did you consider what you were doing was wrong?
CAROLINE ELLISON: Yeah, definitely.
JUDGE KAPLAN: Let's take our morning break here.
(Recess)
JUDGE KAPLAN: Let's get the witness. Ms. Sassoon, a little repetitive.
MR. COHEN: Your Honor, can we have an estimate of how much longer the direct will take?
JUDGE KAPLAN: That would be a nice thing. Ms. Sassoon.
(Jury present)
JUDGE KAPLAN: The defendant and the jurors all are present, as they have been throughout. Ms. Sassoon and Mr. Cohen, come to the sidebar.
(Continued on next page)
(At sidebar)
JUDGE KAPLAN: How much longer?
MS. SASSOON: I expect to finish after the lunch break but before the end of the day.
JUDGE KAPLAN: How long do you expect to be?
MR. COHEN: Certainly into tomorrow, obviously. Depends on how quickly it goes or not. I'm hoping to finish by Friday at the latest.
JUDGE KAPLAN: Thank you.
(Continued on next page)
(In open court)
JUDGE KAPLAN: You may continue.
MS. SASSOON: Ms. Ellison, right before the break I believe you testified that you thought sending the dishonest balance sheet to Genesis was wrong. Do you recall that?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: In the course of working with the defendant, did he talk to you about the ethics of lying and stealing?
CAROLINE ELLISON: Yeah. He said that he was a utilitarian, and he believed that the ways that people tried to justify rules like don't lie and don't steal within utilitarianism didn't work, and he thought that the only moral rule that mattered was doing whatever would maximize utility, so essentially trying to create the greatest good for the greatest number of people or beings.
MS. SASSOON: What did he say about how lying or stealing fit into that?
CAROLINE ELLISON: He said he didn't think rules like don't lie or don't steal fit into that framework.
MS. SASSOON: How, if at all, did the defendant's expressed attitude about lying and stealing affect you?
CAROLINE ELLISON: I think it made me more willing to do things like lie and steal over time. When I started working at Alameda, I don't think I would have believed it if you told me that a few years later I would be sending false balance sheets to our lenders or taking customer money, but over time it was something that I became more comfortable with when I was working there.
MS. SASSOON: At this time the government offers Government Exhibit 850, which the parties have stipulated is a tweet from the defendant's account.
MR. COHEN: No objection.
JUDGE KAPLAN: It's received.
(Government Exhibit 850 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish the exhibit.
MS. SASSOON: Whose tweet is this?
CAROLINE ELLISON: This is Sam's tweet.
MS. SASSOON: The tweet says: Backstopping customer assets should always be primary. Everything else is secondary. What does it mean to backstop customer assets?
CAROLINE ELLISON: It means they are to ensure there are enough funds so that all customers can have their assets returned.
MS. SASSOON: This was tweeted on June 27, 2022. With respect to FTX customer assets, what had happened in the month of June before this tweet?
CAROLINE ELLISON: Alameda had taken billions of dollars of them in order to repay our lenders.
MS. SASSOON: Did you consider this tweet misleading?
CAROLINE ELLISON: Yeah, I did. I didn't think it lined up with Alameda's behavior at the time.
MS. SASSOON: In June of 2022, as far as you understood it, did FTX have sufficient funds to backstop customer assets?
CAROLINE ELLISON: No, not at all.
MS. SASSOON: Why not?
CAROLINE ELLISON: Because Alameda had borrowed several billion dollars of them.
MS. SASSOON: Have you heard the term segregating customer assets?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What do you understand that to mean?
CAROLINE ELLISON: To mean keeping customer assets separate from other types of assets, like things that you have on your company's balance sheet.
MS. SASSOON: Focusing for a moment on Alameda's North Dimension bank account, did FTX or Alameda segregate customer assets that were deposited into that Alameda bank account?
CAROLINE ELLISON: No, we did not. They were commingled with Alameda's own funds.
MS. SASSOON: After Alameda repaid some of its lenders in June of 2022, what, if any, third-party loans did Alameda have left?
CAROLINE ELLISON: We still had maybe a ballpark of $4 billion of third-party loans at that time.
MS. SASSOON: Who are the largest remaining lenders?
CAROLINE ELLISON: I believe they were Genesis, BlockFi, and Voyager.
MS. SASSOON: Do the names Ledn and Maple mean anything to you?
CAROLINE ELLISON: Yes. Those were other smaller lenders.
MS. SASSOON: And those other smaller lenders, were they loaning to Alameda after June?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: Did you continue to share information with the defendant about Alameda's balance sheet after June of 2022?
CAROLINE ELLISON: Yes, I did. I gave him regular updates.
MS. SASSOON: And after June, did you continue to send balance sheets to Alameda's remaining lenders?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: How often were you preparing and sending external balance sheets?
CAROLINE ELLISON: Typically, I would have done it about once a quarter. In 2022, I started doing it more often, as lenders were asking for more frequent updates, so I think I was sending them often, once a month or more.
MS. SASSOON: And how, if at all, was Alameda's use of FTX customer money accounted for on balance sheets that you prepared for your lenders after mid June of 2022?
CAROLINE ELLISON: It was not disclosed. Some of it was netted against Alameda's related-party loans and the rest of it was put in a more general loans or long-term loans category.
MS. SASSOON: Would this be similar to what we saw in alternative 7?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: Your Honor, permission to approach the witness with a few exhibits, and I have copies for defense and the Court.
JUDGE KAPLAN: Yes.
MS. SASSOON: I'm handing you Government Exhibits 418, 419, and 460, if you can take a look and tell me if you recognize these.
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: Generally, what are these?
CAROLINE ELLISON: These are some of the balance sheets that I prepared and sent to lenders during this time period. So one of them is from June 30 of 2022 and two are from September 30 of 2022.
MS. SASSOON: The government offers Government Exhibits 418, 419, and 460.
MR. COHEN: No objection.
JUDGE KAPLAN: They are received.
(Government Exhibits 418, 419, and 460 received in evidence)
MS. SASSOON: I am not going to review these with you line by line. I am just going to ask you a few questions. Do you consider these balance sheets dishonest?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: How so?
CAROLINE ELLISON: Because the money that we were borrowing from FTX is -- some of it is netted against the related party loans, making both our assets and our liabilities look smaller than they actually are, and the rest of just put in the loans category.
MS. SASSOON: Do these balance sheets disclose Alameda's borrowing from FTX customers?
CAROLINE ELLISON: No, they do not.
MS. SASSOON: Did Alameda's borrowing relationship with Genesis continue past June?
CAROLINE ELLISON: Yes, it did.
MS. SASSOON: And what happened with some of Alameda's remaining loans with Genesis?
CAROLINE ELLISON: Some of its fixed-term loans were Genesis asked us to repay them, and we did.
MS. SASSOON: Did you discuss that with the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: How did you repay them?
CAROLINE ELLISON: By taking more FTX customer assets.
MS. SASSOON: Did you continue to prepare internal versions of Alameda's balance sheet?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 19.
MS. SASSOON: Is this one of those internal balance sheets?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: The government offers Government Exhibit 19, which the parties have stipulated is a document titled: Balance sheet, 9/1/22, dated September 1, 2022.
JUDGE KAPLAN: Received.
(Government Exhibit 19 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish Government Exhibit 19.
MS. SASSOON: I will just ask you a few questions about this balance sheet. When is this balance sheet from?
CAROLINE ELLISON: This is from September of 2022.
MS. SASSOON: And was this an internal balance sheet or one that was shared with third parties?
CAROLINE ELLISON: It was internal.
MS. SASSOON: How do you know that?
CAROLINE ELLISON: Because it has the line FTX borrows, which isn't something that I would have shared with third parties.
MS. SASSOON: Did you share this with the defendant?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What does this show where FTX borrows in September of 2022?
CAROLINE ELLISON: It shows that it was about $13.7 billion.
MS. SASSOON: So what does that mean?
CAROLINE ELLISON: That means that Alameda was borrowing around $13.7 billion from FTX customers.
MS. SASSOON: That would be around September of 2022?
CAROLINE ELLISON: That's right.
MS. SASSOON: A previous balance sheet we looked at had a number of 9.9 billion. How did that amount of money from FTX customers that Alameda had used go up to almost $14 billion?
CAROLINE ELLISON: Some of it was used to repay some of our remaining loans. I think some more was withdrawn for our trading or for collateral or for further investments.
MS. SASSOON: You said this was an internal balance sheet. In row 17 I don't see a line for related-party loans. Is that accounted for anywhere on this internal balance sheet?
CAROLINE ELLISON: Yeah. Instead of grouping all the related party loans together, I separated them out into what the loans ultimately were used for, so things like buying FTX equity or investments in companies like GDA.
MS. SASSOON: If you look under liabilities it says loans, 1,740. Is that $1,740,000,000?
CAROLINE ELLISON: Yes, that's correct.
MS. SASSOON: What loans is that referring to?
CAROLINE ELLISON: Those are remaining open-term loans and it has a breakdown of them in the next few columns, some from BlockFi, Voyager, Genesis, and others.
MS. SASSOON: Just to be clear, did you share this internal balance sheet with Alameda's lenders?
CAROLINE ELLISON: No, I did not.
MS. SASSOON: You can take that down.
MS. SASSOON: With respect to the internal dishonest version of this balance sheet that you were sharing, how did you feel about sharing that information that was in the external version with your lenders?
MR. COHEN: Objection. Leading.
JUDGE KAPLAN: Sustained as to form.
MS. SASSOON: With respect to the external balance sheet that you were sharing with lenders, how did you feel about the information that was conveyed there?
CAROLINE ELLISON: I thought it looked better than what was on the internal balance sheet, but I still felt nervous about sharing it to lenders and trying to avoid sharing it when possible. I thought that even though it was dishonest, it still did make it clear that Alameda had a fair amount of risk on and was borrowing a fair amount of money.
MS. SASSOON: What is Celsius?
CAROLINE ELLISON: Celsius was a crypto lending desk that went bankrupt in the summer of 2022.
MS. SASSOON: Was Alameda borrowing money from Celsius?
CAROLINE ELLISON: Yes, we were.
MS. SASSOON: Mr. Bianco, if you can show the witness Government Exhibit 189 and zoom in on the top.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: What is it?
CAROLINE ELLISON: This was an internal Signal chat about Celsius asking for some of their loans to be returned.
MS. SASSOON: The government offers Government Exhibit 189.
JUDGE KAPLAN: Received.
(Government Exhibit 189 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish Government Exhibit 189.
MS. SASSOON: What is the title of this Signal chat group?
CAROLINE ELLISON: Celsius loan return.
MS. SASSOON: And the first three participants are Richard Chang, Caroline Ellison, Sam Bankman-Fried. Who is Richard Chang?
CAROLINE ELLISON: Richard Chang was the head of our lending at Alameda.
MS. SASSOON: I just want to read the start of the message Mr. Chang wrote: Wanted to follow up on Celsius a bit internally here. Celsius has now, one, provided the addresses for the loan returns. Do you see that?
CAROLINE ELLISON: Yes.
MS. SASSOON: If we could go to the last four messages of this exhibit. Mr. Bianco, if you could zoom in there.
MS. SASSOON: Can you read what the defendant wrote.
CAROLINE ELLISON: He said: So I think -- we don't send balance sheet. We say we'll return loans as soon as Celsius is prepared to return collateral, otherwise we're waiting.
MS. SASSOON: What did you say?
CAROLINE ELLISON: I said yep.
MS. SASSOON: Why did you agree that you should not send the balance sheet to Celsius?
CAROLINE ELLISON: Because I didn't think we would get much benefit from sending the balance sheet. It wasn't like they were going to lend us any more money. And I wanted to send it to as few people as possible.
MS. SASSOON: Mr. Bianco, can you show the witness what's been marked as Government Exhibit 11.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: Is this an internal balance sheet?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: The government offers Government Exhibit 11, which the parties have stipulated is a document titled balance sheet, 10/1/22, dated October 7, 2022.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 11 received in evidence)
MS. SASSOON: Mr. Bianco, if you could please bring up Government Exhibit 11.
MS. SASSOON: What's the time frame of this balance sheet?
CAROLINE ELLISON: This was another balance sheet that was made in the fall of 2022.
MS. SASSOON: Did you share this with the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Just to be clear, did you also share the September internal balance sheet we previously looked at with the defendant?
CAROLINE ELLISON: Yeah.
MS. SASSOON: The title of this document was balance sheet 10/1/2022. What month is this balance sheet for?
CAROLINE ELLISON: For October.
MS. SASSOON: And it appears here that the amount of money owed to FTX customers has not changed from September. It's $13.7 billion. Why is that?
CAROLINE ELLISON: I think this was a mistake I made on the balance sheet. I copied over the number from the previous month and forgot to update it.
MS. SASSOON: What do you recall about the actual approximate amount of Alameda's liability to FTX customers in October?
CAROLINE ELLISON: I recall it being similar but getting a bit larger, maybe 14 to 15 billion.
MS. SASSOON: I want to focus on some notations in the spreadsheet that we have not seen before. In the right-hand corner there is the word plan, colon. If we could zoom in on that, Mr. Bianco, to the bottom.
MS. SASSOON: What is this?
CAROLINE ELLISON: These were notes I made from a conversation with Sam.
MS. SASSOON: And this conversation with the defendant, what was it about?
CAROLINE ELLISON: It was initially about our balance sheet, and then we were talking about potential plans to hedge some of our risk and to get more capital.
MS. SASSOON: Why, in the course of looking at the balance sheet, were you discussing these types of plans?
CAROLINE ELLISON: Because the balance sheet showed that we had a lot of risk on and that we owed a lot of money to FTX customers, so in that context it made sense to talk about ways to reduce that risk or to get some money to repay.
MS. SASSOON: Why did you take these notes inside the balance sheet?
CAROLINE ELLISON: Because we were looking at the balance sheet when we were having this discussion.
MS. SASSOON: What did you mean by: Plan, keep selling Bitcoin if greater than 20K, maybe a couple B more?
CAROLINE ELLISON: That was Sam's suggestion, that if Bitcoin went above $20,000, we should sell up to a couple billion dollars worth of it.
MS. SASSOON: And what was the rationale?
CAROLINE ELLISON: The rationale was to decrease our risk from further cryptocurrency down moves.
MS. SASSOON: It says beneath that: FTX may raise. What does that refer to?
CAROLINE ELLISON: That's referencing the fact that Sam said he would try to raise capital by selling FTX equity.
MS. SASSOON: By raising capital for FTX by selling equity, what does that mean?
CAROLINE ELLISON: That means he was going to try to sell shares in FTX to people to get more money.
MS. SASSOON: What kinds of people?
CAROLINE ELLISON: To investors. The primary one that he talked about at the time was Mohammed Bin Salman, who is a Saudi prince.
MS. SASSOON: How did raising money from people like a Saudi prince relate to Alameda's balance sheet?
CAROLINE ELLISON: If we were able to raise money, that was money that we could use to repay the money we had borrowed from FTX customers, and it would put FTX in a safer position if customers tried to withdraw a lot of money.
MS. SASSOON: Can you explain that. The money that Alameda owed to FTX customers, you were discussing repaying how?
CAROLINE ELLISON: By having FTX sell shares in the company.
MS. SASSOON: So, for example, with money from Mohammed Bin Salman?
CAROLINE ELLISON: That's right.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 10.
MS. SASSOON: What is this?
CAROLINE ELLISON: This looks like an external balance sheet that I prepared during this time, fall of 2022.
MS. SASSOON: The government offers Government Exhibit 10, which the parties have stipulated is a document titled external balance sheet, 10/1/2022, dated October 17, 2022.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 10 received in evidence)
MS. SASSOON: Mr. Bianco, if you can publish this, please.
MS. SASSOON: I believe you said this is an external balance sheet. What makes you say that?
CAROLINE ELLISON: Because it doesn't include our FTX borrows on it.
MS. SASSOON: So where, if at all, is the $13.7 billion that Alameda owed to FTX customers reflected here?
CAROLINE ELLISON: Some of it is netted against the related-party loans, I believe some of it is also netted against the other crypto category, and the rest is put in the long-term loans category.
MS. SASSOON: Did you share this with the defendant?
CAROLINE ELLISON: Yeah, I did.
MS. SASSOON: Mr. Bianco, if you could bring up this document, external balance sheet, 10/1/2022, side by side with Government Exhibit 10.
JUDGE KAPLAN: Before you do that, please, Ms. Ellison, where is the reference to related-party loans?
CAROLINE ELLISON: That's not on this balance sheet.
JUDGE KAPLAN: You said some of the borrowings from FTX customers were netted against other crypto and some was netted against related-party loans, if I understood you correctly. Did I understand you correctly?
CAROLINE ELLISON: Yes, that's correct. I think maybe on the internal balance sheet from this month there might not be a category called related-party loans because it was broken down into several subcategories of that.
MS. SASSOON: We can look at that.
JUDGE KAPLAN: You were about to go there. Is that what's happening?
MS. SASSOON: When your Honor is ready, I'll bring up the two versions, the internal and the external, side by side.
JUDGE KAPLAN: I'm ready.
MS. SASSOON: This is the last spreadsheet.
JUDGE KAPLAN: Microsoft's stock must be plunging.
MS. SASSOON: On the left-hand side, just to orient you, we have Government Exhibit 11, which I believe you testified was the internal balance sheet, and on the right-hand side we have the document titled external balance sheet, October 1, 2022. Let's compare them.
MS. SASSOON: Mr. Bianco, if you could highlight FTX borrows 13.7 on the left-hand side.
MS. SASSOON: Is there any similar line item on the right-hand side?
MS. SASSOON: You said you netted in the right-hand side the money Alameda owed to FTX customers against related-party loans. Where is that information about related-party loans in the internal version on the left-hand side?
CAROLINE ELLISON: It's not specifically labeled as related-party loans, but it's broken down into these several subcategories of FTX equity, FTX US equity and so on.
MS. SASSOON: How did these categories like K5, GDA relate to the related-party loans?
CAROLINE ELLISON: Those are all either parts of the related-party loans or investment in equity securities.
MS. SASSOON: Just to spell that out, is it your understanding that related-party loans were spent on these types of investments?
CAROLINE ELLISON: Yes.
MR. COHEN: Objection. Leading.
JUDGE KAPLAN: Sustained. Rephrase.
MS. SASSOON: Can you explain how these categories under the long-term column relate to the related-party loans, if at all?
CAROLINE ELLISON: The related-party loans were used on these investments.
MS. SASSOON: How did the total liabilities compare on the internal and external version of the October balance sheet?
CAROLINE ELLISON: On the internal version, it's 15.6 billion. On the external version, it's only 8 billion.
MS. SASSOON: In the fall of 2022, what did you believe about Alameda's ability to repay the $13 billion it had borrowed from FTX customers?
CAROLINE ELLISON: I believe that we had no way to repay it currently, and we would either hope for the crypto market to go up or raise a large amount of money by selling FTX equity, or something along those lines.
MS. SASSOON: Why was that your belief?
CAROLINE ELLISON: Because from looking at these balance sheets, you can see that the FTX borrows number is $13.7 billion and our liquid assets are much less than that.
MS. SASSOON: You have talked about concealing this debt from Alameda's lenders. As far as you know, was the debt FTX owed to Alameda customers -- was the debt Alameda owed to FTX customers disclosed to FTX's customers?
CAROLINE ELLISON: Not as far as I know.
MS. SASSOON: How would you describe your state of mind at this point, when Alameda owes FTX customers about $14 billion?
CAROLINE ELLISON: I was in a state of dread. I was kind of thinking and worrying, imagining every day about what might happen if people try to withdraw too much money at one time. I was imagining all the FTX customers and lenders to Alameda, everyone that we had worked with who would get hurt by this.
MS. SASSOON: I want to take a step back. You testified about conversations you had with the defendant over Signal about the alternative spreadsheet and repaying lenders. Where did some of those conversations take place?
CAROLINE ELLISON: Sorry. Can you repeat the question.
MS. SASSOON: How did you generally communicate with the defendant about the information you were going to share with Alameda's lenders, for example?
CAROLINE ELLISON: A lot of it was over Signal. Some of it was in-person conversations as well.
MS. SASSOON: Do these Signal messages still exist?
MS. SASSOON: Why not?
CAROLINE ELLISON: Because Sam directed us to use the disappearing messaging setting on our Signal, meaning that all messages we sent in these conversations would disappear after seven days.
MS. SASSOON: You said that the defendant directed you to use disappearing messages. Who is the us you're talking about?
CAROLINE ELLISON: Employees at FTX and Alameda.
MS. SASSOON: What, if anything, did the defendant tell you about putting things in writing?
CAROLINE ELLISON: He said that we should be very careful about what we put in writing. He had multiple like -- whole company meetings to this effect. He said that putting things in writing was one of the primary ways that financial firms got in legal trouble. He said that we should think about the New York Times test, meaning that anything we put in writing on Slack should be something we are comfortable seeing on the front page of the New York Times. And he said that if we were going to have any sort of sensitive conversations, we should have them either over Signal with disappearing messages or in person or not at all.
MS. SASSOON: After the defendant sent those things, were you careful about what you put in writing?
CAROLINE ELLISON: Yeah, I was pretty careful.
MS. SASSOON: How so?
CAROLINE ELLISON: For things like Alameda taking FTX customer funds, it wasn't something that I wrote about very much. I did put the line item of FTX borrows on our internal balance sheet, though I sort of -- I debated a bit about whether I should or whether Sam would be upset about that, but I wanted to make sure that line was clear, so I put it on there, and Sam didn't raise any objections. Besides that, I didn't have many explicit, especially written conversations about what we were doing.
MS. SASSOON: Mr. Bianco, can you show the witness what's marked as Government Exhibit 1659.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is the Signal chat between me and Sam.
MS. SASSOON: The government offers Government Exhibit 1659.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 1659 received in evidence)
MS. SASSOON: Mr. Bianco, can you please publish this exhibit.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is the Signal chat between me and Sam.
MS. SASSOON: What's the date that this was created?
CAROLINE ELLISON: On March 5, 2021.
MS. SASSOON: Can you read what it says beneath that.
CAROLINE ELLISON: It says: Sam Bankman-Fried set disappearing message time to one week.
MS. SASSOON: So for any messages between you and the defendant prior to November of 2022, do those messages still exist?
CAROLINE ELLISON: Not the Signal messages, no.
MS. SASSOON: Before June of 2022, do you recall occasions when you and the defendant spoke in coded terms about potential criminal activity?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: What comes to mind?
CAROLINE ELLISON: One example is, when Alameda paid what I believe was a large bribe to Chinese government officials to get some of our exchange accounts unlocked.
MS. SASSOON: Let's break that down a bit. In 2021, did Alameda have trading accounts on exchanges other than FTX?
CAROLINE ELLISON: Yeah. We had accounts on many and dozens of exchanges.
MS. SASSOON: What are OKX and Huobi?
CAROLINE ELLISON: Those were two exchanges that we had accounts on, both based in China.
MS. SASSOON: What happened to Alameda's trading accounts based on Huobi and OKX in 2021?
CAROLINE ELLISON: They were both frozen, meaning that the exchanges wouldn't let us withdraw any money. When we asked why, they told us that they had been frozen as part of a Chinese government investigation into money laundering.
MS. SASSOON: Just to be clear, this investigation into money laundering, was it an investigation of Alameda?
CAROLINE ELLISON: No. We were told it was an investigation of someone else, but that person had traded with Alameda at some point.
MS. SASSOON: Who was CEO of Alameda at the time that the trading accounts were first frozen?
CAROLINE ELLISON: It was Sam.
MS. SASSOON: Just to be clear, what does it mean that the accounts were frozen?
CAROLINE ELLISON: It means we were unable to withdraw our money, and eventually they prevented us from trading on the accounts as well, though that was not immediately true.
MS. SASSOON: About how much money was frozen?
CAROLINE ELLISON: Around a billion dollars.
MS. SASSOON: This $1 billion that was frozen in Alameda's accounts, was that a substantial amount of Alameda's trading capital at the time?
CAROLINE ELLISON: Yes, it was.
MS. SASSOON: How did the defendant react to the freezing of $1 billion, approximately $1 billion of Alameda's trading capital?
CAROLINE ELLISON: He seemed concerned and seemed to want to find ways to address this problem. He held several in-person meetings and started a Signal group to discuss potential solutions.
MS. SASSOON: Were the accounts eventually unfrozen?
CAROLINE ELLISON: Yes, they were.
MS. SASSOON: About how long did it take?
CAROLINE ELLISON: I think almost a year.
MS. SASSOON: What is your understanding of how the accounts were unfrozen?
CAROLINE ELLISON: My impression was that they were unfrozen by Alameda paying a bribe to Chinese government officials.
MR. COHEN: Move to strike.
MS. SASSOON: I'll lay a foundation, your Honor.
JUDGE KAPLAN: I am going to strike it. And notwithstanding that there was not a timely objection, I will strike it. The jury will disregard that.
MS. SASSOON: Who were some of employees involved in the efforts to unfreeze the account?
CAROLINE ELLISON: There were several people in the meetings, including Sam, me, Gary, Nishad, Constance, David Ma and Handi Yang.
MS. SASSOON: You mentioned employees by the name of Constance, David Ma, and Handi. Why were they part of these meetings?
CAROLINE ELLISON: They were all Chinese and had some level of connections in China.
MS. SASSOON: You said that it took about a year to unfreeze the accounts. Were there some efforts undertaken that were unsuccessful?
CAROLINE ELLISON: Yes, there were. One is that we hired a lawyer in China and had them negotiate with the Chinese government, but that was unsuccessful after several months. Another is that we used various strategies, trading strategies, to try to move funds out of our frozen accounts to other accounts.
MS. SASSOON: What was one of those trading strategies?
CAROLINE ELLISON: On OKX we made several accounts using the IDs of different people who I believe were Thai prostitutes, and we tried to basically have our main account lose money and have those other accounts make money, so do very imbalanced trades between the two accounts so those other accounts would be able to make money and withdraw it.
MS. SASSOON: How did you learn of the identities of these other people whose accounts were used to trade?
CAROLINE ELLISON: Ryan Salame told me about them.
MS. SASSOON: Who is part of that conversation with Ryan Salame?
CAROLINE ELLISON: Sam was as well. I don't remember who else.
MS. SASSOON: Did that work?
CAROLINE ELLISON: No, it didn't.
MS. SASSOON: Did there come a time when another measure to unfreeze the accounts was discussed?
CAROLINE ELLISON: Yes. David Ma from sort -- from the early meetings had been suggesting that we should try his way to unfreeze the accounts. But Sam initially said no, let's not try that yet, but eventually, after enough time had passed, he changed his mind and said we should try it.
MS. SASSOON: When you said eventually he changed his mind, who are you talking about?
MS. SASSOON: Were other employees involved in these discussions where David Ma suggested trying things his way?
CAROLINE ELLISON: Yeah. The employees that I mentioned earlier were involved in the discussions.
MS. SASSOON: And how did other employees involved in the unfreezing efforts react to the suggestion of doing things David Ma's way?
CAROLINE ELLISON: I remember Handi in particular being very upset and protesting a lot and saying that she thought it was a bad idea and would get us in trouble.
MS. SASSOON: What, if any, connections did Handi have to the Chinese government?
CAROLINE ELLISON: Her father was a Chinese government official.
MS. SASSOON: What, if anything, did the defendant do when Handi expressed her opposition to trying things David Ma's way?
CAROLINE ELLISON: At one point Handi was talking a lot and wouldn't be quiet and let other people talk, even after Sam had asked her a couple of times, so eventually he yelled at her to shut the fuck up.
MS. SASSOON: Had you seen the defendant react that way to employees before?
CAROLINE ELLISON: Not that often, but sometimes he would yell in sort of very busy or stressful trading situations.
MS. SASSOON: Based on what David Ma said and Handi's reaction and the defendant's reaction, did you draw any conclusions about what was meant by Ma's way?
MR. COHEN: Objection. Calls for speculation.
JUDGE KAPLAN: Sustained.
MS. SASSOON: You said that the defendant eventually changed his mind about doing things Ma's way. What, if anything, did he tell you to do at that point?
CAROLINE ELLISON: He said that we should send cryptocurrency transfers and gave us the directions, or I don't remember if it was Sam or David Ma in the same conversation with Sam, but one of them gave us the directions of the amounts and the addresses that we should send them to.
MS. SASSOON: When you say amounts and addresses, what do you mean by addresses?
CAROLINE ELLISON: Cryptocurrency addresses, so like the address of someone's cryptocurrency wallet.
MS. SASSOON: In the context of providing you these cryptocurrency wallet addresses, what did the defendant say?
CAROLINE ELLISON: He said that Ma had found a way to get her accounts unfrozen and that all we needed to do was send this money to these addresses.
MS. SASSOON: Roughly how much money did the defendant tell you to send to these cryptocurrency wallet addresses?
CAROLINE ELLISON: There were a few payments. I don't remember the exact number, but I think it was ballpark $100 million.
MS. SASSOON: Around when was this?
CAROLINE ELLISON: I think it was November of 2021.
MS. SASSOON: Did you make the payments?
CAROLINE ELLISON: Yes, we did.
MS. SASSOON: When you made that payment, did you know for certain who the recipient was?
MS. SASSOON: Did you have a conclusion about who it was?