3.Caroline Ellison — Direct/Cross (Part 3)
1,444 linesMS. SASSOON: Ms. Ellison, you testified about payments the defendant directed you to make. How were those relayed to you?
CAROLINE ELLISON: How was the direction relayed to me?
MS. SASSOON: Was in person, over Signal, or some other form?
CAROLINE ELLISON: It was over Signal.
MS. SASSOON: Who else was part of that Signal discussion?
CAROLINE ELLISON: Trabucco. It was me, Sam, Trabucco, and I don't remember if there was anyone else in the discussion.
MS. SASSOON: When you say Trabucco, are you referring to Sam Trabucco?
CAROLINE ELLISON: That's right.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 1631.
MS. SASSOON: Before I ask you about that, one question for you, Ms. Ellison. After you participated in the making of these payments, did you lie to any employees of Alameda about the nature of the payment?
CAROLINE ELLISON: Yeah, I did. I had a conversation with Ben Xie where he was asking about the payment, and I reassured him and I said I didn't know too much about it but I thought our legal had approved it, something like that.
MS. SASSOON: What was the nature of Ben Xie's question to you?
CAROLINE ELLISON: I think he asked me if I was aware of the FCPA and whether this was a violation of that.
MS. SASSOON: What's the FCPA?
CAROLINE ELLISON: The foreign --
MR. COHEN: Objection.
MS. SASSOON: There was no objection to the testimony.
JUDGE KAPLAN: No. Overruled. A. The Foreign Corrupt Practices Act.
JUDGE KAPLAN: Just to reiterate what I said, there is no charge against the defendant in this case of any violation of the Foreign Corrupt Practices Act or anything else of that character that I mentioned before.
MS. SASSOON: When you told Ben Xie that this had been approved by a lawyer, was that truthful?
MS. SASSOON: Why did you lie to him?
CAROLINE ELLISON: Because I didn't want him raising concerns about this with others, and I didn't want the fact of our crime to get out.
MS. SASSOON: I'd like to direct your attention now to Government Exhibit 1631. Do you recognize this?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is a Signal chat between me, Sam, and Trabucco.
MS. SASSOON: The government offers Government Exhibit 1631.
JUDGE KAPLAN: Received.
(Government Exhibit 1631 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this, please.
MS. SASSOON: What's the date of this first message from the defendant that says, by the way, Handi is being pretty antagonistic?
CAROLINE ELLISON: The date is January 28, 2022.
MS. SASSOON: Who was Handi?
CAROLINE ELLISON: Handi was a trader at Alameda who quit shortly before this.
MS. SASSOON: Is this the same Handi that you described objecting in the meeting with David Ma?
CAROLINE ELLISON: That's right.
MS. SASSOON: What was going on with Handi in January?
CAROLINE ELLISON: She had quit Alameda, and she was trying to negotiate for severance payments, and she seemed somewhat upset at us. It was a somewhat acrimonious conversation.
MS. SASSOON: Mr. Bianco, if you can go to the next page or go down to the February 1, 2022 messages.
MS. SASSOON: Can you read what Sam Trabucco wrote on February 1, 2022.
CAROLINE ELLISON: He said: Did Handi's father immediately turn us in or something.
MS. SASSOON: Who is Handi's father?
CAROLINE ELLISON: He was a Chinese government official.
MS. SASSOON: What did the defendant respond?
CAROLINE ELLISON: LOL.
MS. SASSOON: What's LOL?
CAROLINE ELLISON: It stands for laughing out loud. He thought the comment was funny.
MS. SASSOON: Did you understand the joke?
CAROLINE ELLISON: I don't recall if I understood it precisely at the time. I knew that -- I understood it to be referring to --
MR. COHEN: Objection. Move to strike.
JUDGE KAPLAN: Look. I will let it stand: I don't recall if I understood it precisely at the time. And what the witness said after that the jury will disregard.
MS. SASSOON: Your Honor, I would ask to strike the entirety, because she was qualifying what she just said when she was interrupted.
JUDGE KAPLAN: Then I'll strike the whole thing.
MS. SASSOON: We can take that down.
MS. SASSOON: After being named CEO of Alameda Research, did you write updates about Alameda for the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: How often would you do that?
CAROLINE ELLISON: It wasn't on a regular schedule, but maybe once every couple of months or so.
MS. SASSOON: For what purpose were you doing that?
CAROLINE ELLISON: Both as a way for me to reflect on Alameda and as a way to update him on what was happening and get his comments and feedback.
MS. SASSOON: Mr. Bianco, can you pull up Government Exhibit 64 for the witness.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is one of those update documents that I wrote.
MS. SASSOON: The government offers Government Exhibit 64, which the parties have stipulated is a document called state of Alameda, 11/25/21, dated November 25, 2021.
JUDGE KAPLAN: Received.
(Government Exhibit 64 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this for the jury, please.
MS. SASSOON: Who wrote this document?
CAROLINE ELLISON: I wrote it.
MS. SASSOON: And around when did you write it?
CAROLINE ELLISON: In November of 2021.
MS. SASSOON: Who, if anyone, did you share this with?
CAROLINE ELLISON: With Sam.
MS. SASSOON: Why were you sharing it with the defendant?
CAROLINE ELLISON: To update him on major things that had happened in Alameda and get his feedback.
MS. SASSOON: Was that a general practice of yours?
CAROLINE ELLISON: Yeah.
MS. SASSOON: Mr. Bianco, if we can zoom in on the section that begins notable/idiosyncratic PNL stuff.
MS. SASSOON: What does that heading referring to?
CAROLINE ELLISON: That refers to large things that had either be gains or losses on Alameda in the past year.
MS. SASSOON: I would like to direct your attention to the middle of this list where it says negative 150M from "the thing" question mark. What's M?
CAROLINE ELLISON: That means millions. This is negative $150 million.
MS. SASSOON: What are you referring to here that was a negative $150 million expense for Alameda?
CAROLINE ELLISON: I was referring to our payments to get the China accounts unlocked.
MS. SASSOON: Why did you call it "the thing" instead of just saying the payments to get the accounts unlocked?
MR. COHEN: Objection to leading.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: Because I didn't want to put in writing that we had paid what I believed were bribes to get these accounts unlocked.
MR. COHEN: Objection. Move to strike.
MS. SASSOON: Your Honor, it's not being offered for the truth.
JUDGE KAPLAN: Overruled.
MR. COHEN: Yes, it is, your Honor.
JUDGE KAPLAN: Counsel, when I rule, that's the end of the discussion. Could we agree on that?
MR. COHEN: Of course, your Honor.
JUDGE KAPLAN: Thank you.
MS. SASSOON: When you sent this to the defendant, did he ever express any confusion or ask any follow-up questions about what you meant by negative 150 million from "the thing"?
MS. SASSOON: You said you didn't want to be more explicit in this document. What was your mindset when it came to writing about the repayment of lenders using customer money?
CAROLINE ELLISON: I wanted to be careful about what I wrote down. I wrote down things that I thought were important to be aware of on our balance sheet, but I was careful about not saying in too explicit language that we took money from customers to repay our loans.
MS. SASSOON: Why is that?
CAROLINE ELLISON: Because I thought it might leak. It could eventually be used against us in a court case.
MS. SASSOON: Mr. Bianco, we can take that down.
JUDGE KAPLAN: Before you proceed, what I'm reasonably confident I heard and the question to which Mr. Cohen objected was: Why did you call it "the thing" rather than just saying the payments to get the accounts unlocked? Am I mistaken in thinking the word why was the way the question began?
MR. COHEN: No, your Honor.
JUDGE KAPLAN: Do you agree, Ms. Sassoon?
MS. SASSOON: Yes.
JUDGE KAPLAN: I'll ask the reporter to correct the transcript in that respect. Let's proceed.
MS. SASSOON: I want to turn to the summer and fall of 2022. Around then what, if anything, did you and the defendant discuss about ways to get more money for FTX?
CAROLINE ELLISON: We discussed a few different ideas. One was that FTX was in the process of acquiring BlockFi, and Sam suggested that we could get some of either BlockFi to lend more money to Alameda or get BlockFi's assets moved on to FTX. Another idea was that of raising money for FTX by selling equity.
MS. SASSOON: What kinds of things was the defendant saying about raising money for FTX through equity in the summer and fall of 2022?
CAROLINE ELLISON: In the summer, for a few months he was saying he thought it wasn't a good time and the market was still too fragile. Then later on, in the fall of 2022, he said that he was going to try to start raising money.
MS. SASSOON: How would you describe the state of your communication with the defendant around this time?
CAROLINE ELLISON: We had broken up a few months prior, so I was trying to avoid spending much time with him in social contexts and avoid having many one-on-one conversations with him, but we were still communicating via Signal, as we had always done, and we were having group meetings.
MS. SASSOON: How would you describe your communications about Alameda's business?
CAROLINE ELLISON: I still gave him the same regular updates I had on Alameda's balance sheet and our financial situation.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 25A. You know what, we can take that down. If you could show the witness Government Exhibit 25B, please.
MS. SASSOON: Ms. Ellison, do you recognize this?
CAROLINE ELLISON: Yeah. This is part of a personal to-do list document that I kept.
MS. SASSOON: Did this include to-do lists related to your responsibilities at Alameda?
CAROLINE ELLISON: Yes, it did.
MS. SASSOON: The government offers Government Exhibit 25B.
JUDGE KAPLAN: Received.
(Government Exhibit 25B received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is a section of a personal to-do list document that I kept.
MS. SASSOON: I want to direct you to where it says work priorities, colon. What is this list?
CAROLINE ELLISON: This list was a list of things that I considered top priorities for my job.
MS. SASSOON: Do you recall around when you made this list?
CAROLINE ELLISON: Yeah. It was around the fall of 2022.
MS. SASSOON: At the top it says: Hedging/getting more capital. What are you referring to there?
CAROLINE ELLISON: Those were ways of either reducing Alameda's risk or getting more capital that we could use to repay our borrowers from FTX.
MS. SASSOON: Can you just explain what hedging is?
CAROLINE ELLISON: So hedging is, if you own something, such as in this case Alameda owned say a lot of FTT and you want to reduce your risk from that, you can sell something else that is correlated with that asset. So Alameda could have sold Bitcoin because that was correlated with FTT and that would mean if FTT goes down, we will lose less money than we otherwise would.
MS. SASSOON: Why were hedging and getting more capital priority for you in the fall of 2022?
CAROLINE ELLISON: Because Alameda had on a lot of risk and because we had a very large quantity of borrows from FTX that we were unable to repay.
MS. SASSOON: Around August of 2022, what conversations with the defendant do you recall about Alameda's hedging practices that year?
CAROLINE ELLISON: Yeah. We had an in-person conversation in August of 2022 where Sam -- we initially started by talking about Alameda's balance sheet, and then Sam started saying that he thought Alameda should have hedged way more earlier in the year and that it was a big mistake and that it was my fault and that I was largely responsible for the financial situation that Alameda had ended up in.
MS. SASSOON: This conversation that you are describing, where did it take place?
CAROLINE ELLISON: It was in our apartment, in the study.
MS. SASSOON: Why were you talking about Alameda's hedging that year and whose fault it was?
CAROLINE ELLISON: Because we were -- the conversation started by talking about Alameda's financial situation, so hedging was sort of a natural next step to talk about as in like how did we get into that situation in the first place.
MS. SASSOON: When you said you talked about how Alameda got into this financial situation in the first place, what financial situation?
CAROLINE ELLISON: The situation where we were in a very risky position where we were borrowing over $10 billion from FTX and we didn't have the assets to repay that.
MS. SASSOON: When you say you were discussing that you had borrowed $10 billion from FTX, just to be clear, whose funds were those?
CAROLINE ELLISON: FTX customers.
MS. SASSOON: How would you describe the defendant's demeanor when he told you that it was a mistake not to hedge and it was your fault?
CAROLINE ELLISON: He was speaking pretty loudly and strongly.
MS. SASSOON: How did you react?
CAROLINE ELLISON: I got very upset, I started crying, and I had trouble continuing the conversation.
MS. SASSOON: What did he say that caused you to have trouble finishing the conversation?
CAROLINE ELLISON: That it was my fault that Alameda had gotten into that situation.
MS. SASSOON: What did you think about that accusation?
CAROLINE ELLISON: I mean, I thought that I absolutely could and should have done things differently, and that I could have hedged more earlier in the year. But I also thought that Sam was the one who chose to make all these investments that put us in a leveraged position in the first place and that it wasn't necessarily -- yeah. His suggested hedging strategy was we should have sold more stock market futures earlier in the year, and I thought that it wasn't necessarily clear, without hindsight, that getting short of the stock market was a good idea.
MS. SASSOON: At that point did you agree that the reason Alameda was in this bad financial situation was because of a failure to hedge?
CAROLINE ELLISON: I thought that hedging could have helped our situation, but I felt that the fundamental reason we were in the situation was that we had borrowed these billions of dollars in open-term loans and used them for illiquid investments.
MS. SASSOON: Whose decision was that?
CAROLINE ELLISON: That was Sam's.
MS. SASSOON: To the extent Alameda had suffered losses that year, where were those losses coming from?
CAROLINE ELLISON: They were coming from our positions in cryptocurrencies like FTT, Serum, and Solana and our venture investments.
MS. SASSOON: Who had directed those investments?
MR. COHEN: Objection. Asked and answered.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Who had directed Alameda to invest in coins like FTT, Solana, and Serum?
MR. COHEN: Same objection.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Your Honor, I believe she testified about other types of investments but not these.
JUDGE KAPLAN: I sustained the objection.
MS. SASSOON: After this conversation with the defendant, did Alameda put on additional hedges?
CAROLINE ELLISON: Yes, we did.
MS. SASSOON: Does it cost money to put on hedges?
CAROLINE ELLISON: It requires you to put up collateral, so we sold several billion dollars of NASDAQ futures, and to do that we had to post maybe in the ballpark of $2 billion of collateral with our brokers.
MS. SASSOON: So in order to post $2 billion of collateral to put on hedges, where did that money come from?
CAROLINE ELLISON: It came from our FTX borrowing.
MS. SASSOON: Specifically from where?
CAROLINE ELLISON: From FTX customers.
MS. SASSOON: And around when was this?
CAROLINE ELLISON: This was in the fall of 2022.
MS. SASSOON: Let's look at the next page of this document. Do you see where it says: Things Sam is freaking out about?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What is this list?
CAROLINE ELLISON: This was a list that I often kept and updated and tried to note the things that Sam had seemed most upset or concerned or adamant about, things he had been mentioning the most.
MS. SASSOON: Just to be clear, in drawing the conclusion that he was concerned about these things, where were you getting that information?
CAROLINE ELLISON: Because he would talk about them a lot and say that they were important and we should be focusing more on them.
MS. SASSOON: The first item here is hedging. Is that what we just talked about?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: I want to direct you to where it says raising from MBS. What is that?
CAROLINE ELLISON: That's raising capital by selling shares of FTX to Mohammed Bin Salman.
MS. SASSOON: Is that the Saudi prince you mentioned earlier?
CAROLINE ELLISON: That's right.
MS. SASSOON: What about getting capital from BlockFi?
CAROLINE ELLISON: That's the thing I mentioned earlier. BlockFi was sort of in the process of being acquired by FTX, and Sam mentioned that we could use that relationship to get more loans or assets from them.
MS. SASSOON: Do you see where it says: Getting regulators to crack down on Binance. What does that refer to?
CAROLINE ELLISON: Sam said that he thought that was one of the best potential ways for FTX to improve its market share. He said that if there was a regulatory action taken against Binance that a lot of Binance customers might move to FTX and that he had been hoping this would happen for a while, and various regulators had been promising him that this would happen for a while, but it never happened.
MS. SASSOON: And you referred to increasing FTX market share. Can you just explain what you meant by that.
CAROLINE ELLISON: What I mean is, getting more customers to move to FTX and, therefore, making FTX more profitable and more attractive for investors.
MS. SASSOON: It says toward the bottom: Buying SNAP and trading JGBs. What is that?
CAROLINE ELLISON: Snap is Snapchat, which Sam was talking about wanting to buy stock in or acquire around this time. JGBs are Japanese government bonds.
MS. SASSOON: Around this time, in the fall of 2022, was the defendant still involved in decisions about Alameda's trading and investments?
CAROLINE ELLISON: Yeah. These are two examples.
MS. SASSOON: You see the second item here, it says: Bad PR in the next six months, Alameda/FTX.
CAROLINE ELLISON: Um-hum.
MS. SASSOON: What does this refer to?
CAROLINE ELLISON: Sam said that he was worried about bad PR or bad media or press about the relationship between Alameda and FTX, especially in the next six months, because in the next six months he was hoping that FTX would get licensed to provide futures trading in the United States.
MS. SASSOON: Your Honor, I can continue or I could also break here, whatever you have in mind for a breaking time.
JUDGE KAPLAN: Give me an idea how much longer you are going to be.
MS. SASSOON: Sorry. I didn't hear your Honor.
JUDGE KAPLAN: Please give me an idea of how much longer you are going to be.
MS. SASSOON: One and a half hours.
JUDGE KAPLAN: Let's break here until 1:30.
(Luncheon recess)
AFTERNOON SESSION 1:34 p.m.
(In open court; jury not present)
JUDGE KAPLAN: Good afternoon, everyone. Let's get the witness and get the jury.
(Jury present)
JUDGE KAPLAN: Okay. The jurors and the defendant all are present, as they have been throughout. The witness is reminded she's under oath. Proceed, Ms. Sassoon, please.
MS. SASSOON: Thank you, your Honor. DIRECT EXAMINATION CONTINUED
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, when we stopped for our lunch break, we were talking about an item on the list called "bad PR." So I want to take a few minutes to talk about public relations more generally. How would you generally describe the defendant's approach to public relations?
CAROLINE ELLISON: He said that he believed in a very proactive approach to public relations. He spent a lot of time cultivating relationships with reporters and on tweeting, maintaining his Twitter presence.
MS. SASSOON: As far as you know, did the defendant make any financial investments in the media?
CAROLINE ELLISON: Yes, he made a few that I'm aware of.
MS. SASSOON: And what were those?
CAROLINE ELLISON: I believe one was a company called Semafor; there were a few that I can think of that he considered making, like VOX and I think Forbes.
MS. SASSOON: Are you familiar with a publication called The Block?
CAROLINE ELLISON: Yes.
MS. SASSOON: And what do you recall about The Block?
CAROLINE ELLISON: The Block was a crypto news site that Sam expressed that he thought was good and that he eventually invested in.
MS. SASSOON: What, if anything, did the defendant say about his investment in The Block?
CAROLINE ELLISON: He said he thought it was the best crypto news organization, and I think he said that they were in some amount of financial trouble and he wanted to support them so they could continue their reporting.
MS. SASSOON: And what, if anything, did he say about the effect that he intended for his investments?
CAROLINE ELLISON: I don't recall anything beyond him saying that he wanted to support The Block.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 1619.
MS. SASSOON: Do you recognize this chat?
CAROLINE ELLISON: I do.
MS. SASSOON: What is it?
CAROLINE ELLISON: This is a Signal chat between me, Sam, and some other people.
MS. SASSOON: The government offers Government Exhibit 1619.
JUDGE KAPLAN: Received.
MR. COHEN: Your Honor, may we approach briefly on this?
JUDGE KAPLAN: All right.
(Continued on next page)
(At the sidebar)
MS. SASSOON: We're pulling up a hard copy.
MR. COHEN: You can have mine if you don't mind the notes.
JUDGE KAPLAN: I don't mind the notes.
MR. COHEN: They're indecipherable. Your Honor, we have no objection to the comments by the defendant coming in, but the other comments I believe are from someone named Will MacAskill, who is, as I understand it, not a co-conspirator under the government's theory, so we would ask that they not be offered for their truth and the Court give an appropriate instruction.
JUDGE KAPLAN: Do you have any problem with that?
MS. SASSOON: No.
JUDGE KAPLAN: Thank you. Okay.
(Continued on next page)
(In open court)
JUDGE KAPLAN: Okay. Members of the jury, this exhibit is received. As you will see, it's a chat. Certain statements are attributable to the defendant. Those statements are received for all purposes. There are a couple of statements attributed to somebody else. Those statements are not received for the truth of anything this other person said but rather to give you only the context of the defendant's remarks. Any objection to that charge?
MS. SASSOON: Your Honor, there's also a message from Ms. Ellison, so there are three people who sent messages in this chat.
JUDGE KAPLAN: Ah, yes. I, not being an experienced reader of chats, missed that. The statements by Ms. Ellison are received for all purposes as well.
MR. COHEN: You can't be less experienced than me, your Honor, but no objection.
JUDGE KAPLAN: Oh, now we're going to have a contest in the next day or two.
(Government's Exhibit 1619 received in evidence)
MS. SASSOON: Mr. Bianco, if you can publish this exhibit for the jury, Government Exhibit 1619.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, do you see this is a chat called Fellowship Discussion?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: What's the date of it?
CAROLINE ELLISON: January 5, 2022.
MS. SASSOON: And are you on this chat?
CAROLINE ELLISON: Yes, I am.
MS. SASSOON: As well as the defendant?
CAROLINE ELLISON: That's right.
MS. SASSOON: And just to clarify one point, you talked earlier about auto-delete policies for Signal messages, but we're looking at one right now. How do you explain that?
CAROLINE ELLISON: Not all people in all chats had these auto-delete policies so most chats relating to FTX and Alameda business did, but some of our chats, especially relating to our——our philanthropy, did not.
MS. SASSOON: Can you read the defendant's first message.
CAROLINE ELLISON: It says, "For what it's worth, February 8 to 16, Michael Lewis is going to be in the Bahamas profiling us.
MS. SASSOON: Who is Michael Lewis?
CAROLINE ELLISON: He was a well-known financial writer.
MS. SASSOON: And what was the defendant referring to when he said he's "going to be in the Bahamas profiling us"?
CAROLINE ELLISON: Sam had agreed to cooperate with a book that Michael Lewis was writing about Sam and cryptocurrency more generally.
MS. SASSOON: What did you write in response?
CAROLINE ELLISON: I said, "Yes, it makes sense. I feel like my instincts are more toward under the radar, but I might just be irrationally biased toward that in general."
MS. SASSOON: What do you mean by "my instincts are more toward under the radar"?
CAROLINE ELLISON: Meant that I generally tried to avoid press and media when possible.
MS. SASSOON: Can you read the defendant's response.
CAROLINE ELLISON: He said, "Same, except exactly the opposite."
MS. SASSOON: As far as you know, what happened with Michael Lewis?
CAROLINE ELLISON: He did end up writing a book about Sam.
MS. SASSOON: And can you read the second half of the message from Will.
CAROLINE ELLISON: It says, "But if a whole bunch of attention is going to be on FTX, Sam, and EA, whatever happens, then getting ahead of the game and controlling the narrative is approximately necessary."
MS. SASSOON: How did the defendant respond to that?
CAROLINE ELLISON: He said "Yup."
MS. SASSOON: Did Michael Lewis in fact spend time with you in the Bahamas?
CAROLINE ELLISON: Yes, he did.
MS. SASSOON: And as far as you know, was he included in any conversations with you and the defendant about Alameda's use of customer funds?
MS. SASSOON: Based on your conversations with the defendant about public relations, what image of himself was the defendant cultivating?
CAROLINE ELLISON: He was trying to cultivate an image of himself as sort of a very smart, competent, somewhat eccentric founder.
MS. SASSOON: Were you cultivating a personal image of yourself?
CAROLINE ELLISON: Not to the same extent. For a while I mostly tried to stay off Twitter and tried to avoid all media. Eventually I did get a Twitter once Sam Trabucco started stepping back more from the company. And Sam said he thought it was necessary for someone from Alameda to be on Twitter.
MS. SASSOON: Based on your conversations with the defendant about public relations, what image was he cultivating about FTX?
MR. COHEN: Objection, relevance.
MS. SASSOON: Your Honor, this goes to misrepresentations that were made to the public.
JUDGE KAPLAN: Sustained.
MS. SASSOON: What, if anything, did the defendant tell you about how he was trying to portray FTX publicly?
MR. COHEN: Same objection.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: He said that he wanted FTX to have the image of being a, you know, exciting, innovative place to trade on, similar to offshore exchanges, but also being safe, reliable, audited, and highly regulated, like other US exchanges.
MS. SASSOON: You mentioned Twitter. What, if anything, did the defendant say about his use of Twitter?
CAROLINE ELLISON: He said it was very important and a valuable way to cultivate customers and to help control the narrative around FTX.
MS. SASSOON: What was your reaction to cultivating a public image of FTX as safe and reliable?
CAROLINE ELLISON: I mean, it varied over time. I would say particularly in 2022, I thought that was definitely an inaccurate image.
MS. SASSOON: Why is that?
CAROLINE ELLISON: Because in 2022 Alameda was borrowing around $10 billion of FTX customer funds that we had no way to repay, meaning that it wasn't a safe place for customers to keep their money.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 1642.
MS. SASSOON: Who is the person in this photograph?
CAROLINE ELLISON: It's Sam.
MS. SASSOON: Government offers Government Exhibit 1642.
JUDGE KAPLAN: Received.
(Government's Exhibit 1642 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish Government Exhibit 1642.
BY MS. SASSOON:
MS. SASSOON: How would you describe the defendant's personal appearance throughout 2022?
CAROLINE ELLISON: I would say he looked like he didn't put a lot of effort into his personal appearance. He dressed sort of sloppily and didn't cut his hair often.
MS. SASSOON: What, if anything, did he tell you about that?
CAROLINE ELLISON: He said he thought his hair had been very valuable. He said ever since Jane Street, he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX's narrative and image.
MS. SASSOON: When you first moved to the Bahamas, what kinds of cars did you and the defendant drive?
CAROLINE ELLISON: We both got assigned luxury company cars.
MS. SASSOON: And did that change?
CAROLINE ELLISON: Yeah. We both switched to driving——I believe he was driving a Toyota Corolla and I had a Honda Civic.
MS. SASSOON: What, if anything, did the defendant say to you about that?
MR. COHEN: Objection. Relevance.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: He said he thought it was better for his image to be driving a Toyota Corolla.
MS. SASSOON: Are you familiar with the public statements the defendant made about where he slept?
CAROLINE ELLISON: Yeah. I'm aware that he made statements about sleeping on a beanbag in the office.
MS. SASSOON: And when you first moved to the Bahamas, where was the defendant living?
MR. COHEN: Same objection.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: He lived in an apartment with me and several others, though it's true that he did often sleep on beanbags in the office.
MS. SASSOON: And what, if anything, did he tell you about those statements about sleeping on a beanbag?
CAROLINE ELLISON: Nothing particular comes to mind.
MS. SASSOON: Did there come a time when Alameda and FTX experienced what you considered negative PR?
CAROLINE ELLISON: Yeah.
MS. SASSOON: Around when was that?
CAROLINE ELLISON: I mean, there were many periods of time, but one in particular that Sam said he was concerned about was in the fall of 2022, when he said he was concerned about Alameda and FTX PR because of the license that FTX was trying to get.
MS. SASSOON: And what do you recall in particular?
CAROLINE ELLISON: He said that, I mean, there was a Bloomberg article about the relationship between Alameda and FTX that he was unhappy about.
MS. SASSOON: And what about that article did the defendant say he was unhappy about?
CAROLINE ELLISON: He said that he was unhappy about the insinuations about Alameda and FTX's relationship.
MS. SASSOON: And what do you recall about the article's insinuations about FTX's and Alameda's relationship?
CAROLINE ELLISON: It——
MR. COHEN: Objection.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Mr. Bianco, will you show the witness Government Exhibit 908.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: I do.
MS. SASSOON: What is it?
CAROLINE ELLISON: This is the Bloomberg article I was talking about.
MS. SASSOON: Your Honor, the government offers this for a nonhearsay purpose, not for its truth, and to explain the subsequent actions of the defendant and Ms. Ellison.
MR. COHEN: We would request a limiting instruction, your Honor.
JUDGE KAPLAN: Yes. Members of the jury, the article, Exhibit 908, is received not for the truth of the matters stated but for the fact that the statements were made and to explain subsequent behavior of the defendant and the witness.
(Government's Exhibit 908 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish Government Exhibit 908.
BY MS. SASSOON:
MS. SASSOON: Is this the Bloomberg article you were just talking about?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: What is the date of this article?
CAROLINE ELLISON: September 14, 2022.
MS. SASSOON: What is the headline?
CAROLINE ELLISON: It says, "Crypto Quant Shop with Ties to FTX Powers Bankman-Fried's Empire."
MS. SASSOON: And can you read the sub headline beneath that.
CAROLINE ELLISON: It says Alameda is a——"Alameda Research is a little-scrutinized power player in virtual currencies. As its influence grows, so do concerns over a potential market advantage."
MS. SASSOON: Before this article was published, did you speak to the reporter?
CAROLINE ELLISON: I did.
MS. SASSOON: Did you generally speak to reporters about Alameda?
CAROLINE ELLISON: No, not usually.
MS. SASSOON: Why did you speak to this reporter?
CAROLINE ELLISON: She was someone that I knew personally, a friend of a friend, and so I thought that she might have a more favorable take than most reporters. I asked Sam whether he thought it was a good idea for me to speak to her and he said yes.
MS. SASSOON: Before you spoke to the reporter, did you discuss with anyone else what you would say?
CAROLINE ELLISON: Yeah, I wrote a Google Doc outlining some answers to potential questions the reporter might ask.
MS. SASSOON: If we could go to the second page of this article.
MS. SASSOON: I want to direct your attention to the bottom of the page, the paragraph beginning, "Alameda is a wholly separate entity."
MS. SASSOON: And Mr. Bianco, if you could zoom in. And can you highlight from "'Alameda is a wholly separate entity,' said Bankman-Fried, who is estimated to own more than 50 % of FTX." "It sends orders and accesses customer information the same way other users do, he added." Do you see that?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: And in your view did Alameda and FTX actually operate wholly separately?
CAROLINE ELLISON: No, I wouldn't say so.
MS. SASSOON: Why is that?
CAROLINE ELLISON: I mean, because Sam owned and controlled them both and because there was a lot of interaction between the two companies and staff who shared——who did work at both companies.
MS. SASSOON: Let's look at the third page. Let's zoom in on your quote, beginning "We're arm's length." Do you see where it says, "'We're arm's length and don't get any different treatment from other market makers,' said Ellison"?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: And was that a misleading statement?
CAROLINE ELLISON: Yeah, I think it was.
MS. SASSOON: How so?
CAROLINE ELLISON: We did in fact get different treatment from other market makers in a very significant way in that we had this line of credit that other market makers didn't have, and that allowed us to do profitable trades and to, you know, take money in a way that other market makers were not allowed to.
MS. SASSOON: So if this was a misleading statement, why did you say it to the reporter?
CAROLINE ELLISON: Because I didn't want her or others being aware of the relationship between Alameda and FTX. I heard Sam give statements on it many times and was trying to say things similar to what he had said in the past.
MS. SASSOON: How did the defendant react to this article?
CAROLINE ELLISON: He seemed concerned about it and said that we should be more careful about avoiding any bad PR about Alameda and FTX.
MS. SASSOON: And in what way did you perceive this as bad PR?
CAROLINE ELLISON: Because it suggests that Alameda and FTX have a close relationship and that may cause conflicts of interest.
MS. SASSOON: What do you mean by conflicts of interest?
MS. SASSOON: And we can take this down.
CAROLINE ELLISON: What I mean is that because Sam owned both FTX and Alameda, he had a reason not to treat all of the traders on FTX equally.
MS. SASSOON: And from your standpoint, were there conflicts of interest between FTX and Alameda?
CAROLINE ELLISON: Yes, there were. I think allowing Alameda to borrow billions of dollars was not——from FTX customers was not in the best interest of FTX or its customers, but it was important to keeping Alameda alive.
MS. SASSOON: In the fall of 2022, what steps, if any, did the defendant take to increase an appearance of separation between FTX and Alameda?
CAROLINE ELLISON: One thing he did was directed several entities that had Alameda in the name to be renamed so their association with Alameda wasn't obvious.
MS. SASSOON: Can you think of any examples?
CAROLINE ELLISON: Yeah. I believe Alameda Ventures, Ltd. was renamed to something like MacLaurin Investments; Alameda Research Ventures was renamed to I think Clifton Bay Investments.
MS. SASSOON: And what, if anything, did the defendant say about why he was directing the changing of these entity names?
CAROLINE ELLISON: He said he didn't want our venture investing to be associated with Alameda.
MS. SASSOON: And so were these entities used for venture investing?
CAROLINE ELLISON: Yes, they were.
MS. SASSOON: And just to be clear, where was the money coming from for venture investing that went through these entities?
CAROLINE ELLISON: It was coming from Alameda.
MS. SASSOON: Around the time of the Bloomberg article what conversations, if any, did you have with Nishad Singh and Gary Wang about Alameda's status?
CAROLINE ELLISON: We had a conversation about the idea of shutting off Alameda trading, or at least stopping it from trading on FTX.
MS. SASSOON: And what was the context of this conversation?
CAROLINE ELLISON: Nishad sent me a message saying that he wanted to have a conversation about the idea of Alameda shutting off or stopping its FTX trading. I made some notes about what I wanted to talk about, and shortly afterwards we had this conversation.
MS. SASSOON: What did Nishad explain about why he wanted to have this conversation?
CAROLINE ELLISON: He said that he was concerned and he knew that Sam was concerned about the negative PR about Alameda and FTX and that he was concerned about the CFTC audit which would be required for FTX to get its futures license, and he thought that Alameda might interfere with that.
MS. SASSOON: So when Nishad Singh proposed a meeting, what did you do?
CAROLINE ELLISON: First I made notes in a notebook I had of the reasons that I thought that Alameda——it wouldn't make sense for Alameda to stop its trading.
MS. SASSOON: Mr. Bianco, can you please show the witness Government Exhibit 432. And if you could scroll, Mr. Bianco.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, I do. This is the notes that I took in my notebook prior to entering the meeting.
MS. SASSOON: The government offers Government Exhibit 432.
JUDGE KAPLAN: Received.
(Government's Exhibit 432 received in evidence)
MS. SASSOON: Okay. If we could begin on the second page of Government Exhibit 432 and publish that for the jury.
BY MS. SASSOON:
MS. SASSOON: We see some handwritten notes here. Who wrote this?
CAROLINE ELLISON: I wrote this.
MS. SASSOON: And where did you write this?
CAROLINE ELLISON: It was in a notebook I had.
MS. SASSOON: And we're going to take a closer look, but generally what were you writing here?
CAROLINE ELLISON: These were problems that I saw with turning Alameda off on FTX.
MS. SASSOON: And if you could just walk through the first few and explain what those problems you perceived were.
CAROLINE ELLISON: Yeah. The first bullet point says "BLPs," which stood for backstop liquidity providers. So what I meant by that was that Alameda acted as a backstop liquidity provider. When there were liquidations on FTX, Alameda was one of the firms that would provide those liquidations, so it might be harder to manage liquidations in the margin system without Alameda.
MS. SASSOON: And let's just take one more example from this page. Looks like you wrote "Market making for shitty things." What is that?
CAROLINE ELLISON: Yes, that's right. That was referring to market making for smaller, more illiquid markets, so the ones I listed were tokenized stocks, new listings, Japan, Turkey, etc. These were all markets on FTX where there weren't many other market makers.
MS. SASSOON: Let's go to the next page. Is this a continuation of your list?
CAROLINE ELLISON: Yes, this is the last item on the list.
MS. SASSOON: And what did you write here on the third page?
CAROLINE ELLISON: It says, "True up funds??"
MS. SASSOON: What does that refer to?
CAROLINE ELLISON: That refers to the money that Alameda was borrowing at the time from FTX customers. I was saying that if Alameda shut off trading on FTX or closed down its account, then FTX would just be left with a giant hole in its balance sheet that it would have no immediate way to fill.
MS. SASSOON: And why did you refer to that as "True up funds"?
CAROLINE ELLISON: I wanted to refer to the concept but not write down anything very explicit along the lines of, you know, "return customer money that Alameda took," because of my——my general practice, as directed by Sam, of not writing problematic things down explicitly.
MS. SASSOON: Your Honor, can I request a sidebar.
JUDGE KAPLAN: Yes.
(Continued on next page)
(At the sidebar)
MS. SASSOON: Your Honor, given where I'm standing, I've noticed several times since the lunch break that in response to things the witness has said, the defendant has laughed, visibly shaken his head, and scoffed, and obviously I'm not communicating with the witness, but it's possible it's having a visible effect on her, especially given the history of this relationship, the prior attempts to intimidate her, the power dynamic, their romantic relationship, and I would ask that defense counsel tell him to control his visible reactions to her testimony.
MR. COHEN: Your Honor, this is ridiculous. The defendant is attending this trial. If he's having any reaction at all, that's for your Honor and the jury to decide. I will note that the government is going out of its way to present highly cumulative evidence portraying our——my client as a very dirty person. The last photograph had him holding a deck of playing cards with no testimony about the relevance of that, which I expected. So if they're going to keep doing this, your Honor, can we try the issues in this case.
MS. SASSOON: May I respond.
MR. COHEN: Let me finish. There's been seven photos of my client. We stipulated he had a lot of hair. I mean, we're getting testimony about his hair, we're getting testimony of him holding a deck of playing cards, with no connection?
JUDGE KAPLAN: You haven't had any testimony about his holding playing cards.
MR. COHEN: No, that's right, correct.
JUDGE KAPLAN: You had a photograph in the context of testimony about remarks he made about cultivating a particular image, of which the photograph is arguably probative. So let's——
MR. COHEN: Without any connection.
MS. SASSOON: May I respond, your Honor. Defense counsel specifically asked me not to ask about the deck of cards.
MR. COHEN: Let me finish. Your Honor——no, your Honor goes first.
JUDGE KAPLAN: One at a time. What do you want to say?
MR. COHEN: This is, what, the seventh photograph of him standing there. The one with the head of Binance was probative to show connection. Now we have seven photographs of him to show his hair or with playing cards with no probative evidence offered about that? If we're going to——
JUDGE KAPLAN: We're going to have a different view about whether there's probative value.
MR. COHEN: Okay. If we're going to try the issues in this case, let's try the issues in this case. I am offended by counsel's position, and the notion that someone who she couldn't even pick out in the courtroom, after we stipulated to this, is trying to intimidate her is ridiculous. Let's try the issues in this case, your Honor.
JUDGE KAPLAN: Now look, she did pick him out in the courtroom, first of all. Now——
MS. SASSOON: Your Honor——
JUDGE KAPLAN: No, I don't need a response. I have not looked for and therefore not seen any reactions. That's the first thing I want to be clear about. Secondly, I accept that I'm dealing with honorable and honest counsel all around in this case.
MR. COHEN: Thank you.
JUDGE KAPLAN: All right? So I accept that you're offended, and I accept that Ms. Sassoon has seen what she says she's seen, or at least thinks so.
MR. COHEN: Okay.
JUDGE KAPLAN: I'm not going to say anything publicly, certainly, and I'm not going to send the jury out now, but I would ask you, Mr. Cohen, to go to your client and have a word with him. You know how best to put it. And if he's doing anything, it should stop; and if he's not, then no harm, no foul.
MR. COHEN: Okay.
JUDGE KAPLAN: And I'll keep an eye on him, to the extent I can, because I'm taking copious notes too. And we'll see what happens. Okay?
MR. COHEN: Your Honor, I would just ask if we come back from the sidebar and I would have to counsel my client in front of the jury, it may give the wrong message to the jury.
JUDGE KAPLAN: Well, I can understand that. You'll counsel him at the break.
MR. COHEN: Okay.
JUDGE KAPLAN: And in the meantime, I'll——
MR. COHEN: I will try to counsel him now, your Honor, in an informal way, but I don't have——
JUDGE KAPLAN: Look, I understand the problem, and I'm sympathetic to your problem. And let's do it that way.
MR. COHEN: Thank you.
MS. SASSOON: Thank you.
(Continued on next page)
(In open court)
JUDGE KAPLAN: Okay. Let's continue.
MS. SASSOON: Mr. Bianco, if you could pull back up Government Exhibit 432.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, we were just looking at this list you wrote before your meeting with Nishad Singh. Which, if any, of the items on this list did you view as the biggest problem to shutting down Alameda?
CAROLINE ELLISON: I viewed the last one, truing up funds, as the biggest problem.
MS. SASSOON: Why?
CAROLINE ELLISON: Because the other problems could potentially be gotten around if FTX found other market makers and weren't necessarily existential to FTX, whereas this one was.
MS. SASSOON: And in your view, would it have been possible to replace Alameda in the other functions described on the prior page?
CAROLINE ELLISON: I think it would have been possible, though difficult.
MS. SASSOON: Did you in fact meet with Nishad Singh and Gary Wang?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Where was this meeting?
CAROLINE ELLISON: It was in person in the FTX office in the Bahamas in a conference room.
MS. SASSOON: What did you discuss at this meeting with Nishad Singh and Gary Wang?
CAROLINE ELLISON: We went through the list I had created and discussed the issues with Alameda turning off trading on FTX.
MS. SASSOON: And so did you discuss the items that you wrote in your notebook that we've looked at?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: What, if anything, did you discuss about this last item on your list, "True up funds"?
CAROLINE ELLISON: I brought this up, and Nishad said something along the lines of, Yeah, you're right, that's a pretty big issue. I don't know how we would get around that one.
MS. SASSOON: Let's look at the first page of your notes here. And can you read what it says.
CAROLINE ELLISON: Yeah. It says, "Options. 1) new entity. 2) just turn off. 3) do nothing."
MS. SASSOON: And when did you write this list?
CAROLINE ELLISON: Those were notes that I took during the meeting.
MS. SASSOON: And can you explain these notes.
CAROLINE ELLISON: Those were three options that we discussed during the meeting. The first one would be finding or creating a new entity to perform many of these market-making functions; the second one would be to just turn Alameda's trading off; and the third one would be to do nothing, as in have Alameda continue trading on FTX as usual.
MS. SASSOON: And what did the three of you discuss about the viability of these three options?
CAROLINE ELLISON: I mean, we discussed I think——I think it was Gary who proposed the new entity as a potential option, but I think my objections were that I thought it was sort of adding more dishonesty on top of what we were already doing and that it didn't solve the last problem of truing up funds.
MS. SASSOON: Why did you view a new entity as creating more dishonesty?
CAROLINE ELLISON: Because if it was still Alameda's money or Alameda's staff working for it, then it would still be sort of like Alameda trading on FTX, just on a different name because we were trying to hide it.
MS. SASSOON: And what, if anything, did you discuss with Gary and Nishad about option 2, just turning Alameda off?
CAROLINE ELLISON: We discussed that it had all of the problems that I listed.
MS. SASSOON: Meaning what?
CAROLINE ELLISON: Meaning the problems of not having a market maker for these things and the problems of not being able to true up Alameda's borrows.
MS. SASSOON: And so coming out of the meeting, where did things land?
CAROLINE ELLISON: We landed on option 3, which was do nothing, continue as we had been.
MS. SASSOON: And when you say "do nothing, continue as we had been," what do you mean?
CAROLINE ELLISON: I mean Alameda kept trading on FTX.
MS. SASSOON: Mr. Bianco, if you could pull back up Government Exhibit 25B, page 2.
MS. SASSOON: We looked at this list before, "Things Sam is Freaking Out About." I want to direct your attention to the middle of this list where it says "Alameda/Modulo relationship."
CAROLINE ELLISON: Mm-hmm.
MS. SASSOON: What was Modulo?
CAROLINE ELLISON: Modulo was a crypto hedge fund that Alameda invested in at Sam's direction.
MS. SASSOON: And around when was that?
CAROLINE ELLISON: The initial investment was in early 2022, and we continued making further investments into the fall of 2022.
MS. SASSOON: What was your view of investing in this crypto hedge fund called Modulo?
CAROLINE ELLISON: I was against it. Yeah.
MS. SASSOON: Why were you against it?
CAROLINE ELLISON: Initially I was not convinced that their trading would be good, and I thought that the terms we were giving them were very generous, and then later on in the fall I had the additional reason that Alameda didn't have any more capital and any further capital was coming from FTX customers.
MS. SASSOON: And about how much money was the defendant investing in Modulo?
CAROLINE ELLISON: It was around a few hundred million dollars, I believe.
MS. SASSOON: Did you express your objections to the defendant?
CAROLINE ELLISON: Yeah, I did.
MS. SASSOON: How did he respond?
CAROLINE ELLISON: He wrote a few Google Docs about it and——yeah, he said that he wanted to go ahead with the investments anyway and that I needed to do better at getting along with Modulo and working together productively with them.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 39A.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: Who wrote this?
CAROLINE ELLISON: Sam did.
MS. SASSOON: And what is it generally about?
CAROLINE ELLISON: It was a Google Doc that was sent to both people at Alameda and people at Modulo about how the two companies should do a better job of working together.
MS. SASSOON: The government offers Government Exhibit 39A.
MR. COHEN: Your Honor, may we be heard briefly.
JUDGE KAPLAN: Are you asking for another sidebar?
MR. COHEN: Yes.
JUDGE KAPLAN: Is there an objection?
MR. COHEN: There is.
JUDGE KAPLAN: What is the objection, in a word?
MR. COHEN: In a word, the objection is to Nos. 1 through 23 on the grounds of relevance, and 403, in light of the conversation we just had at sidebar.
JUDGE KAPLAN: Let's scroll down so I can see the rest of it. Have I gotten to the bottom yet?
MS. SASSOON: Mr. Bianco, if you can keep scrolling.
JUDGE KAPLAN: Hold.
MS. SASSOON: And I can make a proffer of relevance if your Honor is interested.
JUDGE KAPLAN: Do you want to do it there or do you want to do it here?
MS. SASSOON: Whatever your Honor prefers.
JUDGE KAPLAN: Let's do it here. And let's try to hold the sidebars to a minimum from now on.
MR. COHEN: Yes, your Honor.
MS. SASSOON: Yes, your Honor.
(Continued on next page)
(At the sidebar)
JUDGE KAPLAN: Okay. What's it all about?
MR. COHEN: Here's my objection, your Honor. In light of the conversation we just had, what conceivable relevance is it that he wrote these items, only to show that he's some sort of crazy person?
MS. SASSOON: I don't know how the conversation we just had has bearing on this document, but the defendant, after Alameda used customer money to repay its debts, continued to spend——
JUDGE KAPLAN: I'm sorry. After?
MS. SASSOON: After Alameda had borrowed customer money to repay its debts, the defendant continued to pour hundreds of millions of dollars into other investments, including Modulo, against the objections of Caroline Ellison, who, as the defense has insinuated, was responsible for Alameda's financial situation. And it also goes to knowledge and intent because he's claiming he didn't know about the precarious financial situation, but he was grooming Modulo as a replacement for Alameda by putting money there, having ownership over it, and saying on the next line, "I see myself as completely aligned with Modulo."
MR. COHEN: To be clear, we're just objecting to this, your Honor. And she's already elicited all the testimony she——
JUDGE KAPLAN: The 23 enumerated paragraphs.
MR. COHEN: Correct.
MS. SASSOON: The defendant wrote these sentences, and it does go to the dynamic between the defendant and Caroline Ellison——
MR. COHEN: Come on, your Honor.
MS. SASSOON: ——where he's——where he's——
MR. COHEN: I apologize.
MS. SASSOON: ——where he's directing the type of loyalty that he expects from his co-conspirator, who's objecting to an investment he wants to make, and saying, You need to be aligned, and, I'm shifting away from Alameda to Modulo.
MR. COHEN: Your Honor, I've heard the proffer. We have an additional ground of cumulativeness to all the testimony she has already elicited about their relationship. This, under 403, substantially outweighs any probative value of these 23 items.
MS. SASSOON: Your Honor, it's the heart of the case.
JUDGE KAPLAN: Stop interrupting each other.
MR. COHEN: The rest of the memo talks about points counsel wants to make about the Alameda-Modulo relationship, which she just elicited testimony about. Your Honor, they don't need this.
MS. SASSOON: Your Honor, this is the heart of the case, whether Caroline Ellison did this without his knowledge or whether she was acting at his direction, and also what his good-faith beliefs were about Alameda's financial situation, and this document is——
JUDGE KAPLAN: How do these 23 enumerated paragraphs go to the latter?
MS. SASSOON: Ms. Ellison is objecting——
MR. COHEN: This is——
JUDGE KAPLAN: Please don't interrupt each other.
MR. COHEN: I apologize.
MS. SASSOON: During this time, the company insiders are contemplating whether Alameda is going to be replaced with a new entity. Ms. Ellison, working at Alameda, for a variety of reasons doesn't want that, and the defendant instead is trying to cultivate Modulo and is giving her directives in this document to stop objecting, be loyal, and do what he says.
MR. COHEN: And the rest of the document, your Honor, is all about the Alameda-Modulo relationship, which counsel is free to inquire into. We're not objecting to that.
MS. SASSOON: He wrote this during the fall of 2022.
JUDGE KAPLAN: I'm going to allow it.
MR. COHEN: Thank you.
(Government's Exhibit 39A received in evidence)
(Continued on next page)
(In open court)
JUDGE KAPLAN: Now let's try to make some progress.
MS. SASSOON: Mr. Bianco, if you could publish Government Exhibit 39A.
BY MS. SASSOON:
MS. SASSOON: Ms. Ellison, who wrote this?
CAROLINE ELLISON: Sam wrote it.
MS. SASSOON: And did you receive this?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And what was it about?
CAROLINE ELLISON: It was about the relationship between Alameda and Modulo.
MS. SASSOON: And why? What had happened before the defendant sent you this document?
CAROLINE ELLISON: I think this was after a dispute that we had over an OTC trade, meaning that they had asked us to do a trade with them and they hadn't been happy with the price that we had offered.
MS. SASSOON: More generally, just to make sure I understand what you mean, this is a dispute that you——that Alameda had with Modulo?
CAROLINE ELLISON: That's right.
MS. SASSOON: And if you could just read item No. 1 on this list.
CAROLINE ELLISON: Says, "Being aligned and always doing whatever you think is best for the company."
MS. SASSOON: And if we could scroll down. Keep scrolling down. Okay. Stop. Sorry. Go up a little bit. Little bit more. Sorry. Okay. Stop.
MS. SASSOON: Can you just read the sentence that starts, "I, SBF."
CAROLINE ELLISON: It says, "I, SBF, basically think both Alameda and Modulo are really aligned and make reasonable, thoughtful decisions."
MS. SASSOON: Okay. And if we can scroll down a little bit more.
MS. SASSOON: Can you read item No. 7.
CAROLINE ELLISON: It says, "SBF is aligned with Alameda plus Modulo and treats 1 dollar to any as the same even though ownership percentages aren't a hundred percent, and in the end I will make sure that each side is fairly acknowledged and treated for public goods created."
MS. SASSOON: Okay. We can take that down. Mr. Bianco, can you show the witness Government Exhibit 310.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes, this is a Slack channel called Private Ventures.
MS. SASSOON: Government offers Government Exhibit 310.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government's Exhibit 310 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this for the jury.
BY MS. SASSOON:
MS. SASSOON: You mentioned Slack. Was that another way employees of the company communicated?
CAROLINE ELLISON: Yes, we often had less sensitive or more routine communications over Slack.
MS. SASSOON: And if we could go to the next page.
MS. SASSOON: Can you read the defendant's message on June 24, 2022.
CAROLINE ELLISON: Yeah. It says, "$50 million for Modulo Capital LP. We should send via Signet," and then gives an address.
MS. SASSOON: What does it mean to send $50 million by Signet?
CAROLINE ELLISON: Signet is a banking system that a lot of companies and crypto use, so that meant send $50 million from our bank account to their bank account.
MS. SASSOON: And what had happened shortly before the defendant directed a $50 million payment to Modulo?
CAROLINE ELLISON: This is around a week after Alameda had used billions of dollars of FTX customer funds to repay our loans.
MS. SASSOON: And in your view, did Alameda have liquid funds at this time to make these sorts of investments?
CAROLINE ELLISON: No. All of our liquid funds were coming from money we had borrowed from FTX.
MS. SASSOON: And so where did you understand the money for this $50 million to Modulo was coming from?
CAROLINE ELLISON: It was coming from Alameda, and that was ultimately coming from FTX customers.
MS. SASSOON: You discussed related-party loans throughout your testimony.
MS. SASSOON: You could take this down.
MS. SASSOON: Did you continue to track intercompany loans into the fall of 2022?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 41.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is a spreadsheet I made to track intercompany loans.
MS. SASSOON: Government offers Government Exhibit 41, which is called——which the parties have stipulated is a document called Intercompany Stuff, dated September 18, 2022.
MR. COHEN: No objection, your Honor.
JUDGE KAPLAN: Received.
(Government's Exhibit 41 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this for the jury.
BY MS. SASSOON:
MS. SASSOON: What is this?
CAROLINE ELLISON: This is a spreadsheet that I made to track loans that were made by Alameda to related parties and entities.
MS. SASSOON: So who are the——what are some of the names of individuals that are on this list?
CAROLINE ELLISON: The individuals include Sam Bankman-Fried, Nishad Singh, Gary Wang, and Ryan Salame.
MS. SASSOON: And what about some of these entities?
CAROLINE ELLISON: Paper Bird was the entity that Sam used to hold his FTX shares; ARV, LLC was an entity that was used to make US-based venture investments.
MS. SASSOON: And what's the total amount of these loans in column C?
CAROLINE ELLISON: The total amount is $8.2 billion.
MS. SASSOON: Let's go to the second tab called Transactions.
MS. SASSOON: And Mr. Bianco, if you could expand column C.
MS. SASSOON: What is this tab?
CAROLINE ELLISON: This is a tab with the——each individual loan that was made.
MS. SASSOON: And just taking an example, can you read the entries in row 1. What is this?
CAROLINE ELLISON: You mean in spreadsheet row 2 or——
MS. SASSOON: Yes.
CAROLINE ELLISON: The lending entity is Alameda Research, LLC, and it was being lent to Alameda Research Investments, Ltd. The amount was $100 million. The date was September 20, 2022. And the notes say that the invest——the loan was for an investment into Modulo.
MS. SASSOON: Let's look at row 40. And what does row 40 show about how much money was loaned to Ryan Salame?
CAROLINE ELLISON: It shows that it was around $35 million.
MS. SASSOON: Directing your attention to rows 41 to 55, who is the recipient of the loans listed here?
CAROLINE ELLISON: Sam was.
MS. SASSOON: And looking at row 48 as an example, it says there was a loan of 20 million on October 1, 2021, that was used for GAP. What is GAP?
CAROLINE ELLISON: GAP stands for Guarding Against Pandemics. That was Sam's political lobbying organization.
MS. SASSOON: And what did you learn about how the money to GAP was spent?
CAROLINE ELLISON: I learned that it was spent on donations to congressional candidates and to political action committees.
MS. SASSOON: Overall, in the summer and fall of 2022, what did you understand about where the money was coming from to make additional venture investments?
CAROLINE ELLISON: I understood that it was coming from Alameda and that Alameda's money was coming from FTX customer funds.
MS. SASSOON: In your view, by making additional investments in the fall and summer of 2022, what effect did this have on Alameda's ability to repay its debt?
MR. COHEN: Objection. Asked and answered.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Let's turn to November of 2022. At a high level, what happened in November of 2022?
CAROLINE ELLISON: Alameda's balance sheet got leaked to CoinDesk, a crypto news outlet. This caused a general market concern about Alameda that increased, ultimately FTT went down a lot, and people started withdrawing a lot of money from FTX, and FTX did not have enough assets to meet all of those withdrawals.
MS. SASSOON: And so what happened?
CAROLINE ELLISON: So FTX and Alameda went bankrupt.
MS. SASSOON: Let's pull up Government Exhibit 1087, which is in evidence.
MS. SASSOON: Let's start first on November 2nd, which is a Wednesday. Where were you on November 2nd?
CAROLINE ELLISON: I was on vacation in Japan.
MS. SASSOON: And what happened on that day?
CAROLINE ELLISON: Alameda's balance sheet was leaked to CoinDesk.
MS. SASSOON: And when we're talking about Alameda's balance sheet getting leaked, is this the internal balance sheet or a version of the external balance sheet that was shared with lenders?
CAROLINE ELLISON: This was a version of the external balance sheet that was shared with lenders.
MS. SASSOON: And what did you do when you learned that Alameda's external balance sheet was leaked?
CAROLINE ELLISON: I——I considered whether to comment for the article and discussed the question in a group with Sam and others but decided not to make any comment.
MS. SASSOON: Why is that?
CAROLINE ELLISON: I mean, most of the time by default I wouldn't comment on articles, and there wasn't anything we could think of that seemed like a clearly helpful comment, and I was hoping at the time the news would just blow over.
MS. SASSOON: What did the leaked balance sheet show?
CAROLINE ELLISON: I mean, it was dishonest so it understated the true extent of Alameda's risk, but it still showed that Alameda was in a fairly risky position and that a lot of this——its assets were FTT and other risky cryptocurrencies.
MS. SASSOON: What happened in the days immediately following this article that leaked Alameda's balance sheet?
CAROLINE ELLISON: At first not much happened for a couple days, but then concern about Alameda started to grow and eventually FTT started going down and people started withdrawing money in greater numbers from FTX.
MS. SASSOON: Let's turn to Sunday, November 6th. Where were you on that day?
CAROLINE ELLISON: At that point I was in Hong Kong, working out of the Hong Kong office.
MS. SASSOON: And that was Alameda's Hong Kong office?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: How were you communicating with the defendant that day?
CAROLINE ELLISON: Over Signal, and I know we had some phone calls during this period. I don't remember specifically if there were any on that day.
MS. SASSOON: With respect to what you described as increased FTX customer withdrawals, what, if anything, was the defendant telling you to do?
CAROLINE ELLISON: He said to liquidate Alameda's positions and send the money to FTX.
MS. SASSOON: Why?
CAROLINE ELLISON: Because——I don't think I——I don't think he specified a reason, but that was our general practice when there were FTX customer withdrawals.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 1621. And if you could zoom in a little so the witness can see the top.
MS. SASSOON: What is this?
CAROLINE ELLISON: This is a chat between Sam, me, and Nishad.
MS. SASSOON: The government offers Government Exhibit 1621.
JUDGE KAPLAN: Received.
(Government's Exhibit 1621 received in evidence)
(Continued on next page)
MS. SASSOON: Mr. Bianco, can you publish Government Exhibit 1621.
MS. SASSOON: Do you recognize these messages between you, Nishad, and the defendant?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: What's the date here?
CAROLINE ELLISON: November 6, 2022.
MS. SASSOON: You testified about auto-deletion features of Signal. At some point did you start preserving your messages in November?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Why?
CAROLINE ELLISON: Everyone else in the company was starting to preserve their messages, and I think someone said that there was a legal reason we should, though I don't remember who.
MR. COHEN: Objection. Move to strike.
JUDGE KAPLAN: I will deny the motion to strike, but I will receive the someone said comment simply for the fact that somebody said it not for the truth of it and for the fact that the witness became aware of it and to explain what she did or didn't do.
MS. SASSOON: Let's take a look at these messages. The first message, Nishad Singh wrote: Lots of withdrawals on FTX are queuing up. Net changes: Negative 1.25 billion in the last day, negative 230 million in the last three hours, negative 120 million in the last hour. What do those numbers represent?
CAROLINE ELLISON: That represents the amount of money that FTX customers had withdrawn in the past day and few hours.
MS. SASSOON: In your experience, was that typical?
CAROLINE ELLISON: No. Typical was a lot less than that.
MS. SASSOON: Nishad Singh then wrote you: Continuing so far at about 120 million an hour. What is that referring to?
CAROLINE ELLISON: He is saying that there were continued withdrawals, about $120 million dollars' worth, in the past hour.
MS. SASSOON: You wrote back with a sad face. Why did you write a sad face?
CAROLINE ELLISON: I mean, I was terrified. This was what I had been worried about for the past several months and it was finally happening. I thought that at this point everything about FTX and Alameda was going to come out.
MS. SASSOON: What did the defendant respond?
CAROLINE ELLISON: He responded oof.
MS. SASSOON: And at this point in time, what was your understanding about whether Alameda or FTX could satisfy all customer withdrawals if they continue to increase?
CAROLINE ELLISON: My understanding was that we could not.
MS. SASSOON: Why?
CAROLINE ELLISON: Based on the most recent balance sheets. I think the most recent one we looked at, at around $14 billion that we were borrowing from FTX, and more like $6 billion of liquid assets that we had on hand.
MS. SASSOON: The balance sheets we looked at also had a number of other assets on the balance sheet. Did that comfort you?
CAROLINE ELLISON: Not really. I mean, for one thing, in any sort of market conditions, it would be hard to sell those assets quickly. But also, if people were starting to withdraw in large amounts from FTX, that would be very negative news for FTX's future and, therefore, would mean our FTX equity and FTT holdings would be worth a lot less, if not zero.
MS. SASSOON: Looking at the bottom here you wrote: Ryan is asking me if FTX can meet all withdrawals. What should I say. Who is Ryan?
CAROLINE ELLISON: That's Ryan Salame. He was an employee at FTX.
MS. SASSOON: Why are you asking about what to say to Ryan about whether FTX could meet all withdrawals?
CAROLINE ELLISON: I mean, I knew that FTX could not meet all withdrawals, but that was a fact that we had tried to conceal in the past, and I was wondering whether I should continue trying to conceal it or just start being honest with people about it once it was becoming evident.
MS. SASSOON: Can we scroll down to the defendant's message that begins, maybe something like. Stop. Mr. Bianco, can you zoom in.
MS. SASSOON: Can you read the defendant's message?
CAROLINE ELLISON: It says: Maybe something like we can meet a ton, though it's already getting large.
MS. SASSOON: What's IDK?
CAROLINE ELLISON: I don't know.
MS. SASSOON: At that point in time what did you think was the accurate response to Ryan Salame's question as to whether FTX could meet all withdrawals?
CAROLINE ELLISON: I thought the accurate response was, no, we could not.
MS. SASSOON: Did you take any public steps on November 6 in light of surging customer withdrawals?
CAROLINE ELLISON: Yes, I did. I made tweets about Alameda's balance sheet.
MS. SASSOON: Why on November 6 did you tweet about Alameda's balance sheet?
CAROLINE ELLISON: Sam started a group Signal chat with me and a few others and said that the concern around Alameda's balance sheet had been growing, and he thought that we needed to do something publicly to address this concern.
MS. SASSOON: And how did it come about that it was addressed through a tweet by you?
CAROLINE ELLISON: I think someone said that we should tweet, and Sam said, I can't be the one to tweet because I don't want to be associated with Alameda, and I said, I don't want to tweet but I can.
MS. SASSOON: Why didn't you want to tweet?
CAROLINE ELLISON: Because I knew that the purpose of such a tweet would be to try to mislead people and give them false reassurance.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 875.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes. These are the tweets I made on that day.
MS. SASSOON: The government offers Government Exhibit 875.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 875 received in evidence)
MS. SASSOON: Mr. Bianco, can you please publish Government Exhibit 875.
MS. SASSOON: Whose tweet is this?
CAROLINE ELLISON: Those are my tweets.
MS. SASSOON: What is the date of your tweet?
CAROLINE ELLISON: November 6, 2022.
MS. SASSOON: Can you read what you wrote.
CAROLINE ELLISON: I said: A few notes on the balance sheet info that has been circulating recently. That specific balance sheet is for a subset of our corporate entities. We have greater than $10 billion of assets that aren't reflected there. The balance sheet breaks out a few of our biggest long positions. We obviously have hedges that aren't listed. Given the tightening in the crypto credit space this year, we've returned most of our loans by now.
MS. SASSOON: How is this tweet meant to reassure customers?
CAROLINE ELLISON: It was meant to imply that our liabilities were less than they might think because it says we return most of our loans and that we had more assets than they might think and that our positions were less risky than they might think.
MS. SASSOON: Was the tweet misleading?
CAROLINE ELLISON: Yeah, I think it was.
MS. SASSOON: How?
CAROLINE ELLISON: In the statement that we've returned most of our loans by now, it was true that we had returned most of our loans to third-party lenders, but we had done so by taking out more loans from FTX.
MS. SASSOON: And what about the statement that there is an additional $10 billion of assets that were not on your balance sheet?
CAROLINE ELLISON: Yeah. In that statement I was meaning to refer to Sam's holdings of FTX equity in the Paper Bird entity, but I think it was misleading because it was a separate entity from Alameda, and because when people see the number 10 billion of assets, they probably wouldn't think that it was all in the same risky asset of FTX's equity.
MS. SASSOON: What was the process for drafting this tweet?
CAROLINE ELLISON: There was some discussion in the group about different ideas for what to include. Based on those discussions, Sam wrote a tweet that he said I could send. A few other people, Nishad and Ryan, both rewrote their own versions, and ultimately I rewrote it in my own words and sent the tweet.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 20.
MS. SASSOON: What is this, Ms. Ellison?
CAROLINE ELLISON: This is a Google Doc I made around the time with all of the draft versions of the tweet.
MS. SASSOON: The government offers Government Exhibit 20.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 20 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this exhibit for Ms. Ellison and the jury.
MS. SASSOON: Can you explain the different parts of this document, what it shows overall.
CAROLINE ELLISON: Yeah. The first part, starting with, heh, I see, and ending with, see, we have already returned most of our loans, is the initial tweet by Sam or the proposed tweet by Sam. Below that is Nishad's proposal, Ryan's proposal, and, finally, mine.
MS. SASSOON: And you said the top has a tweet drafted by the defendant. How did it end up in this document?
CAROLINE ELLISON: I copy and pasted all of the ideas into this document when I was writing my own version.
MS. SASSOON: And why didn't you post this version drafted by the defendant?
CAROLINE ELLISON: Other people in the group said, and I agreed, that it sounded like his writing style.
MS. SASSOON: We can take that down.
MS. SASSOON: We have been talking about November 6. Did the defendant also tweet that day?
CAROLINE ELLISON: Yes, he did.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 863. And this is in evidence. We can publish it.
MS. SASSOON: Ms. Ellison, this is a tweet from November 6, 2022. Did you see it at the time?
CAROLINE ELLISON: Yeah, I did.
MS. SASSOON: And did you consider this tweet misleading?
CAROLINE ELLISON: Yeah, I did.
MS. SASSOON: In what ways was this tweet misleading?
CAROLINE ELLISON: One thing is that it refers to FTX keeping audited financials, which is true. But as we have discussed, the audited financials didn't look at FTX's customer balances, which was the issue in question here. Another thing is, talking about processing withdrawals, it refers to problems as anti-spam checks and no great capacity, when I believe the primary problem was that FTX just didn't have enough assets to process all of the withdrawals.
MS. SASSOON: Did CZ, the CEO of Binance, also tweet that day?
CAROLINE ELLISON: Yes, he did.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 874. If you could zoom in at the top.
MS. SASSOON: Ms. Ellison, do you recognize this?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: What is it?
CAROLINE ELLISON: This is a series of tweets from CZ, the CEO of Binance.
MS. SASSOON: The government offers Government Exhibit 874.
MR. COHEN: No objection, your Honor.
JUDGE KAPLAN: Received.
(Government Exhibit 874 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this for the jury.
MS. SASSOON: Can you read the top tweet by CZ of Binance.
CAROLINE ELLISON: It says: As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash, BUSD and FTT. Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books.
MS. SASSOON: Did you see this tweet at the time?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: What was your reaction?
CAROLINE ELLISON: I was very upset and stressed out by it. I had been hoping that my tweet thread would reassure people, and it seemed like it did for a bit, but then this tweet thread brought up -- brought concerns back and made them even stronger.
MS. SASSOON: Can you explain why this tweet raised concerns?
CAROLINE ELLISON: Because CZ refers to recent revelations that have come to light and says that they are selling all of their FTTs. So it's both very bad news for the price of FTT and also suggesting that Binance is aware of negative news about FTX and Alameda.
MS. SASSOON: Did you discuss this tweet with the defendant?
CAROLINE ELLISON: Yes, we did.
MS. SASSOON: What did you discuss?
CAROLINE ELLISON: We discussed how to respond and decided that I should a tweet in response.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 413A.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yes. This is a Signal chat group I was in.
MS. SASSOON: The government offers Government Exhibit 413A.
MR. COHEN: No objection, your Honor.
JUDGE KAPLAN: Received.
(Government Exhibit 413A received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this for the jury.
MS. SASSOON: This is a Signal chat group called Vertex with Caroline Ellison, Sam Bankman-Fried, Sam Trabucco, and B. Who is B?
CAROLINE ELLISON: B was Ben Xie, who was the head of trading in Alameda.
MS. SASSOON: Prior to November 6, 2022, what was this group chat used for?
CAROLINE ELLISON: It was used primarily for the subject of trading. The most common topics were our overall deltas, like any large trades we were doing and our FTT trading.
MS. SASSOON: When you refer to trading, are you talking about trading Alameda?
CAROLINE ELLISON: Yes, Alameda's trading.
MS. SASSOON: And the defendant was a member of that group?
CAROLINE ELLISON: Yes, he was.
MS. SASSOON: At the top you wrote: I think I am going to tweet at CZ that we will buy it all from him at $22. Any objections? What is the it that you're proposing buying it all for $22?
CAROLINE ELLISON: That refers to the FTT holdings that Binance had.
MS. SASSOON: Why were you suggesting buying all of Binance's FTT for $22?
CAROLINE ELLISON: For one thing, the price of FTT had gone down when CZ had tweeted, and I was hoping that tweeting would make it go back up. I also wanted to call his bluff in some sense because I felt that if he really wanted to sell his FTT, he wouldn't preannounce to the market that he was going to sell it. He would just sell it. So I wanted to point out that his real aim in that tweet, as I saw it, was not to sell his FTT, but was to hurt FTX and Alameda.
MS. SASSOON: Can you read the defendant's message in this thread.
CAROLINE ELLISON: Yeah. He says: I think the main point is just to counter the PR/narrative here, and Binance probably won't take us up on it. I also think, for what it's worth, that the market is more likely to buy more if we tweet it, but I don't know.
MS. SASSOON: You wrote back: I am about to tweet. FTT will go up. Did you post a tweet?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And when you tweeted, were you trying to counter a PR/narrative?
CAROLINE ELLISON: Yes, I was.
MS. SASSOON: What narrative?
CAROLINE ELLISON: The narrative that FTX and Alameda had serious problems and were potentially insolvent.
MS. SASSOON: In your view, at that time, was Alameda and FTX potentially insolvent?
CAROLINE ELLISON: Yeah, absolutely.
MS. SASSOON: Mr. Bianco, can you please show the witness Government Exhibit 876.
MS. SASSOON: Do you recognize this tweet?
CAROLINE ELLISON: Yeah.
MS. SASSOON: What is it?
CAROLINE ELLISON: That's the tweet that I made at the time offering to buy the FTT from CZ at $22.
MS. SASSOON: The government offers Government Exhibit 876.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 876 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this tweet for the jury.
MS. SASSOON: On what date did you tweet offering to buy Binance's FTT for $22?
CAROLINE ELLISON: This was on November 6.
MS. SASSOON: What happened to the price of FTT after these tweets?
CAROLINE ELLISON: It went down after CZ's tweet, it went up after my tweet, and stayed around $22 for some period of time but eventually went back down.
MS. SASSOON: For a period of time did Alameda buy FTT?
CAROLINE ELLISON: Yes, we did.
MS. SASSOON: Did there come a time when Alameda stopped buying FTT and $22?
CAROLINE ELLISON: Yes. There came a time where I saw that we had been buying large amounts of FTT, and I said to Sam, I think it was in this same chat group, something like, we've been seeing a lot of selling. Is it time to give up on defending the $22? And he said, yeah, that sounds right.
MS. SASSOON: About how much money did Alameda spend buying up FTT during this November of time frame?
CAROLINE ELLISON: I don't remember exactly. Maybe in the tens of millions of dollars. Could have been a hundred million dollars or more.
MS. SASSOON: If Alameda had not spent that money buying FTT, how would that money have been used?
MR. COHEN: Objection.
CAROLINE ELLISON: It would most likely have been sent to FTX to help process customer withdrawals.
MS. SASSOON: In your view, was FTX having trouble satisfying customer withdrawals because of the price of FTT?
CAROLINE ELLISON: No. I wouldn't have said that that was a major factor.
MS. SASSOON: If the price of FTT had remained at $22, in your view, would FTX have been able to process all customer withdrawals?
CAROLINE ELLISON: No, not unless something else significant changed. The customers, they weren't withdrawing FTT. They were withdrawing other currencies, so our FTT would have needed to be sold to other currencies. And whatever else was happening in the market, if we tried to sell billions of dollars of FTT, it would have a huge negative price impact.
MS. SASSOON: Let's turn to November 7, which is a Monday. Did you continue to communicate with the defendant on Signal that day?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 406.
MS. SASSOON: Do you recognize these chats that include you and the defendant?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: The government offers Government Exhibit 406.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 406 received in evidence)
MS. SASSOON: Mr. Bianco, please publish this exhibit for the jury.
MS. SASSOON: What was small group chat?
CAROLINE ELLISON: It was a chat that Sam made around this time to discuss our capital situation and potential fundraising.
MS. SASSOON: What's the date of this excerpt from small group chat?
CAROLINE ELLISON: November 7, 2022.
MS. SASSOON: Do you see the defendant's message beginning, so right now, and ending with, so that's roughly 1 to $2 billion left?
CAROLINE ELLISON: Yes.
MS. SASSOON: What is this list?
CAROLINE ELLISON: That's a list of liquid assets that FTX and Alameda had.
MS. SASSOON: What does this show about the amount of liquid assets that FTX and Alameda had left?
CAROLINE ELLISON: It showed, according to this list, that it was around 1 to $2 billion.
MS. SASSOON: You wrote: I think Alameda can get more than that by scraping stuff together and closing our remaining positions. Do you see that?
CAROLINE ELLISON: Yes.
MS. SASSOON: Why would Alameda do that?
CAROLINE ELLISON: Because Alameda was the one who had borrowed all this money from FTX, so we were doing what we could to repay it.
MS. SASSOON: Were these positions you described scraping together positions that were on the FTX exchange, or elsewhere?
CAROLINE ELLISON: No. These were positions that were elsewhere.
MS. SASSOON: These were not assets on FTX.
MS. SASSOON: Let's continue down.
MS. SASSOON: Mr. Bianco, if you can scroll down more. Stop there. I apologize. Please scroll back up to the first table and stop there.
MS. SASSOON: Do you see this table sent by the defendant?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: What does the table show?
CAROLINE ELLISON: It was a table of Alameda and FTX's liquid assets that he thought we could access on a week time scale.
MS. SASSOON: It says total 3.9. What does that mean?
CAROLINE ELLISON: That means the total is $3.9 billion that we could get within a week.
MS. SASSOON: Just to be clear, where it says, does this look right on a week time scale, what does that mean?
CAROLINE ELLISON: That means these were things that I thought we could close or sell or access within the next week.
MS. SASSOON: Let scroll down.
MS. SASSOON: You wrote: Seems ballpark reasonable to me. Why did these numbers seem ballpark reasonable to you?
CAROLINE ELLISON: Because they were based on numbers that I had given him and we have been discussing together about Alameda's balance sheet.
MS. SASSOON: If Alameda and FTX could in fact access $3.9 billion on a week time scale, would that have been enough for all FTX customers?
CAROLINE ELLISON: No, not nearly enough.
MS. SASSOON: Let's look at this next chart. Do you see the same total, 3.9 billion?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: There are two additional rows at the bottom. It says cust assets, question mark, 12. Difference, 8.1. What is cust assets, question mark, 12?
CAROLINE ELLISON: That means that there were around $12 billion of customer holdings on the exchange.
MS. SASSOON: Where it says difference, 8.1, what's that?
CAROLINE ELLISON: That's the difference between the amount of liquid assets that we had and the amount that customers had and were entitled to withdraw.
MS. SASSOON: Is that 12 minus 3.9?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: I just want to clarify this $8.1 billion number. Is that the total amount of money Alameda had borrowed from FTX customers, or something else?
CAROLINE ELLISON: No. The total amount of money was higher, but we had repaid some of it, and we had the potential to repay more of it.
MS. SASSOON: Is this $8.1 billion number only what Alameda owed for FTX customer dollar deposits?
CAROLINE ELLISON: No. It included both the fiat liabilities and crypto liabilities.
MS. SASSOON: Had you known the rough size of this difference between customer holdings and what was available for customers prior to November 7?
CAROLINE ELLISON: Yeah, I had.
MS. SASSOON: How?
CAROLINE ELLISON: For instance, in the most recent balance sheet we talked about, the balance sheet stated that we were borrowing $14 billion from FTX and that we had around $6 billion in liquid assets. The difference in those is $8 billion, which is the same as we see here.
MS. SASSOON: And is that a spreadsheet that you had shared with the defendant?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: Mr. Bianco, can you please show the witness Government Exhibit 480D.
MS. SASSOON: Do you recognize these chats?
CAROLINE ELLISON: Yeah.
MS. SASSOON: Who are the participants in these chats?
CAROLINE ELLISON: This is a chat between me and Sam.
MS. SASSOON: The government offers Government Exhibit 480D.
JUDGE KAPLAN: D as in David?
MS. SASSOON: Yes.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 480D received in evidence)
MR. COHEN: Your Honor, one thing, if I can just consult with Ms. Sassoon for just a moment.
JUDGE KAPLAN: Yes.
MR. COHEN: OK. We are fine, your Honor. Thank you.
MS. SASSOON: Mr. Bianco, if you could publish 480D.
MS. SASSOON: Who are these messages between?
CAROLINE ELLISON: These are messages between me and Sam.
MS. SASSOON: Where it says at the top, by the way, if things got a lot worse, I don't think I am going to handle it well, who wrote that?
CAROLINE ELLISON: That was me.
MS. SASSOON: And the next message in black, who wrote that?
CAROLINE ELLISON: That was also me.
MS. SASSOON: It says: This was such a bad prediction. This is the best mood I've been in in like a year, to be honest. The responses in blue, who wrote those?
CAROLINE ELLISON: Those were written by Sam.
MS. SASSOON: What did Sam write?
CAROLINE ELLISON: He said: Wow, huh, congrats? Because shit's exciting.
MS. SASSOON: What did you write back?
CAROLINE ELLISON: I said: I think I just had an increasing dread of this day that was weighing on me for a long time, and now that it's actually happening, it just feels great to get it over with one way or another.
MS. SASSOON: Did you write these messages around the time that FTX customer withdrawals were surging?
CAROLINE ELLISON: Yes. That's right.
MR. COHEN: I'm sorry. Do we have a specific date for this chat?
JUDGE KAPLAN: Let's do that, if we can.
MS. SASSOON: Your Honor, because this is a screenshot, there is no date on the message itself.
MS. SASSOON: But, Ms. Ellison, do you recall around when you wrote this?
CAROLINE ELLISON: My recollection is that it was around November 7.
MS. SASSOON: At this point in time were you aware of the shortfall in customer funds on the FTX exchange?
CAROLINE ELLISON: Yes, I was.
MS. SASSOON: In light of that, why are you saying that this is the best mood you've been in in a year?
CAROLINE ELLISON: I mean, yeah. To be clear, that was overall the worst week of my life. I had a lot of mood swings during that week and a lot of different feelings. But one of the feelings I had was an overwhelming feeling of relief because, as I said, this had been something that I had been dreading for so long, for the past several months. It's something that had been in my mind every day, worrying about what would happen when the truth finally came out. And I felt a sense of relief that I didn't have to lie anymore, that I could start taking responsibility and being honest about what I had done, even though I obviously felt indescribably bad about all of the people that were harmed and the people that lost their money, the employees that lost their jobs, people that trusted us that we had betrayed.
MS. SASSOON: Why were you sharing this with the defendant?
CAROLINE ELLISON: Because I didn't feel like there was anyone else I could talk to about these feelings because I had been -- this had been something I had been trying to keep secret for the past several months.
MS. SASSOON: When you say it was something you were trying to keep secret, did that include from the defendant?
CAROLINE ELLISON: No. I mean, the -- Alameda taking FTX customer funds was something that I had been trying to keep secret, and I didn't share my feelings much with the defendant about this prior to this that I can recall.
MS. SASSOON: With respect to keeping the use of customer funds secret, who were you keeping that secret from?
CAROLINE ELLISON: From the public.
MS. SASSOON: What about -- I just want to be clear. Were you keeping that from the defendant?
CAROLINE ELLISON: No. It was something we discussed frequently.
MS. SASSOON: We can take that down. Mr. Bianco, can you show the witness Government Exhibit 407.
MS. SASSOON: Is this another excerpt from small group chat?
CAROLINE ELLISON: Yes, it is.
MS. SASSOON: The government offers Government Exhibit 407.
JUDGE KAPLAN: Received.
(Government Exhibit 407 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish this.
MS. SASSOON: The first message on November 7, 2022 here says: Current status.docx. What is that?
CAROLINE ELLISON: That's a link to a document that Sam was sending in this chat.
MS. SASSOON: Is this an example of how you would share documents with the defendant over Signal?
CAROLINE ELLISON: Yeah. More often it would be a Google Doc and, as I said, this might be a Word document, but, yes, we would often share documents over Signal.
MS. SASSOON: Beneath that it says: Potential to-dos: 1. Reach out to Briger, Dustin, Silverlake, Sequoia, and Apollo when they wake up. Who were those entities or people?
CAROLINE ELLISON: Those were all investors or potential investors in FTX.
MS. SASSOON: What did the defendant say for the reason for reaching out to these folks.
CAROLINE ELLISON: To get an emergency infusion of capital, basically to see if we could sell any stock in FTX very quickly at a big discount so that we could use the funds to process more customer withdrawals.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 21.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: Who wrote this?
CAROLINE ELLISON: Sam wrote this.
MS. SASSOON: The government offers Government Exhibit 21, which the parties have stipulated is a document called sources, dated November 6, 2022.
JUDGE KAPLAN: Received.
(Government Exhibit 21 received in evidence)
MS. SASSOON: Mr. Bianco, can you publish that.
MS. SASSOON: Who wrote this document?
CAROLINE ELLISON: It was written by Sam.
MS. SASSOON: And around when did he receive it?
CAROLINE ELLISON: In -- during that week in November of 2022.
MS. SASSOON: And this list 1 to 14, what is that?
CAROLINE ELLISON: Those were potential investors in FTX that Sam or others were going to reach out to.
MS. SASSOON: Let's go to the bottom half of this list. I apologize. The bottom half of this document.
MS. SASSOON: Do you see where it says current status?
CAROLINE ELLISON: Yeah.
MS. SASSOON: I'd like to focus your attention on number 6. Can you read item number 6.
CAROLINE ELLISON: Yeah. It says: That means: 1. We have roughly enough to process current withdrawals. 2. We have another two to three billion of liquidity this week. 3. That would mean enough to process one-third of remaining client assets.
MS. SASSOON: With that number 3, what does that mean?
CAROLINE ELLISON: That means that out of the $12 billion of client assets on the exchange, FTX only had one-third of that, so $4 billion available to process their withdrawals.
MS. SASSOON: Let's go to the bottom of this document, where it says potential to-dos.
MS. SASSOON: This list here, 1 through 4, does that resemble what we saw in small group chat?
CAROLINE ELLISON: Yeah, it does.
MS. SASSOON: What does it mean to halt withdrawals?
CAROLINE ELLISON: It means to stop FTX customers from continuing to withdraw their funds.
MS. SASSOON: Did that happen on November 6 or November 7 of 2022?
CAROLINE ELLISON: No, I don't think so.
MS. SASSOON: What about number 2, send a confident tweet thread?
CAROLINE ELLISON: Yeah. Sam did do that.
MS. SASSOON: Let's take a look at Government Exhibit 866.
MS. SASSOON: I'll focus your attention on number 2: FTX has enough to cover all client holdings. We don't invest client assets, even in treasuries. On November 7, 2022, was that true?
CAROLINE ELLISON: No, it was not.
MS. SASSOON: And why not?
CAROLINE ELLISON: Because it says that FTX has enough to cover all client holdings, but, as we have just been seeing from internal documents, FTX only had $4 billion to cover $12 billion of client holdings, and FTX didn't invest assets itself directly; it loaned them to Alameda, who invested them in assets that were much riskier than treasuries.
MS. SASSOON: Then it says: We have been processing all withdrawals and will continue to be. What do you understand about FTX's ability to process all withdrawals?
CAROLINE ELLISON: I understood that FTX did not have the ability to process all or even half of its withdrawals.
MS. SASSOON: Do you recall customers of FTX tweeting around this time?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: Mr. Bianco, if you could show the witness Government Exhibit 408.
MS. SASSOON: Do you recognize these messages from small group chat?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: The government offers Government Exhibit 408.
JUDGE KAPLAN: Received.
(Government Exhibit 408 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this.
MS. SASSOON: Ms. Ellison, do you recall getting a message from Ryan Salame on November 7, 2022 with a link to Twitter.com/moonoverlord?
CAROLINE ELLISON: Yeah, I do.
MS. SASSOON: The government also offers Government Exhibit 871, which is a tweet, according to the parties' stipulation, a retweet. Mr. Bianco, if we could pull that up just for the Court and the witness. Page 4.
MR. COHEN: No objection, your Honor.
JUDGE KAPLAN: 871 is received.
(Government Exhibit 871 received in evidence)
MS. SASSOON: Mr. Bianco, can you pull up Government Exhibit 871 alongside Government Exhibit 408.
MS. SASSOON: Can you read the tweet by moon over lord?
CAROLINE ELLISON: It says: Can't wait for my FTX airdrop for not moving any of my funds.
MS. SASSOON: And at the top what does it say here?
CAROLINE ELLISON: It says: SBF retweeted.
MS. SASSOON: What does it mean to retweet?
CAROLINE ELLISON: It means to republish someone else's tweet so that it appears on your own timeline and your followers will see it.
MS. SASSOON: Just to be clear, if you retweet something, it would be published on your own Twitter page?
CAROLINE ELLISON: Yes, that's right.
MS. SASSOON: What's the date of that?
CAROLINE ELLISON: November 7, 2022.
MS. SASSOON: Was this around the time you were having discussions with the defendant about discouraging customers from withdrawing their funds from FTX?
CAROLINE ELLISON: Yeah.
MS. SASSOON: You can take that down.
MS. SASSOON: While customer withdrawals were increasing, what was going on with Alameda's lenders?
CAROLINE ELLISON: Alameda's lenders also started recalling their loans.
MS. SASSOON: And these are the remaining lenders from after June?
MR. COHEN: Objection.
JUDGE KAPLAN: What's the objection?
MR. COHEN: Vague.
MS. SASSOON: In November of 2022, did Alameda still have lenders?
CAROLINE ELLISON: Yes, we did. We still had around $2 billion of loans from third parties left.
MS. SASSOON: And I think you said they started recalling those loans. What was your reaction to that?
CAROLINE ELLISON: I mean, I wasn't sure what to do. I wanted to honor our obligations to our lenders, but I also wanted to honor our obligations to FTX customers, and I wasn't sure how to balance those.
MS. SASSOON: Mr. Bianco, can you please show the witness Government Exhibits 410A and 410B.
MS. SASSOON: Do you recognize these?
CAROLINE ELLISON: Yeah. These are more excerpts and small group chat.
MS. SASSOON: The government offers Government Exhibits 410A and 410B.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibits 410A and 410B received in evidence)
MS. SASSOON: Mr. Bianco, if you could first publish 410A.
MS. SASSOON: Do you see your message here from November 8, 2022 asking any opinion on whether Alameda should try and return loans that are being called?
CAROLINE ELLISON: Yeah.
MS. SASSOON: There is a response from Ramnik Arora. Who is he?
CAROLINE ELLISON: He was the head of ventures and investor relations at FTX.
MS. SASSOON: What did he respond to your question?
MR. COHEN: Your Honor, might we have a limiting instruction as to Mr. Arora?
JUDGE KAPLAN: Any objection?
MS. SASSOON: Your Honor, he is also an agent of the defendants because he was an employee. This would be admissible under 801(d)(2)(D).
JUDGE KAPLAN: Why not, Mr. Cohen?
MR. COHEN: Your Honor, this is not within the scope of the agency as it has been defined in this case, so we would ask for the limiting instruction just as to that individual.
JUDGE KAPLAN: Denied.
MS. SASSOON: Ms. Ellison, can you read Ramnik Arora's response to your question?
CAROLINE ELLISON: He said: Probably not. That would put FTX customers at a disadvantage to non-FTX customers, right. Could be totally wrong.
MS. SASSOON: Let's take a look now at Government Exhibit 410B. This is a little later that day. What did you write at 9:49 a.m.?
CAROLINE ELLISON: I said: On second thought, how bad is it to process loan recalls in the next few hours. I kind of just want to do it because we have the capital, and lenders are freaking out, and it seems like it will be another few hours at least, and it will be easier to make them happy and calm them down now, but if it's bad, I cannot.
MS. SASSOON: What did Sam respond?
CAROLINE ELLISON: Sam said: Which lenders? Can certainly do it for all the smaller ones. Would prefer not to do it for BlockFi yet.
MS. SASSOON: Why did you ask if it was bad to start repaying the lenders?
CAROLINE ELLISON: Because I wasn't sure if it would be illegal or just a bad idea for other reasons, so I wanted to get others' opinions.
MS. SASSOON: After the defendant said, can certainly do it for all the smaller ones, did you in fact repay some of your lenders?
CAROLINE ELLISON: We did start to repay some of our lenders.
MS. SASSOON: What effect, if any, did repaying the lenders have on the money available to pay for FTX customer withdrawals?
CAROLINE ELLISON: It meant that there was less money available for FTX customers.
MS. SASSOON: Mr. Bianco, can you please show the witness Government Exhibit 412.
MS. SASSOON: Do you recognize this excerpt from small group chat?
CAROLINE ELLISON: Yes, I do.
MS. SASSOON: The government offers Government Exhibit 412.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government Exhibit 412 received in evidence)
MS. SASSOON: Mr. Bianco, if you could publish this.
MS. SASSOON: Can you read the message you sent on November 8, 2022.
CAROLINE ELLISON: Yeah. It says: Multiple people internally asking me whether they should continue to make statements to external parties, like Alameda is solvent. Should I suggest they stall instead? Just stall in responding to their messages, or what?
MS. SASSOON: At that point did you consider Alameda to be solvent?
MS. SASSOON: Why?
CAROLINE ELLISON: Because we had debts to FTX that were much larger than what we could realistically repay.
MS. SASSOON: Why are you asking in small group chat what you should say about whether Alameda was solvent?
CAROLINE ELLISON: I mean, in the past I had, at Sam's direction, made misleading statements to lenders about Alameda's financial health. I wasn't sure -- I wasn't sure whether it was wise to tell people the truth here, but I also thought it didn't really make much sense to continue lying, so I wasn't sure what to say.
MS. SASSOON: Were there any favorable developments for FTX later on November 8?
CAROLINE ELLISON: Yes. Sam and CZ, the CEO of Binance, worked out a tentative deal whereby Binance would acquire FTX and spend enough money on the acquisition to backstop all FTX customer assets.
MS. SASSOON: What was your reaction to that?
CAROLINE ELLISON: I was extremely relieved. If the deal went through, it would mean that all of FTX's customers would get their money back, which would be more than I was hoping for at the time.
MS. SASSOON: What happened to the deal with Binance?
CAROLINE ELLISON: It fell through when CZ backed out of it.
MS. SASSOON: How soon after the deal had been announced did it fall apart?
CAROLINE ELLISON: It was pretty soon. I think it was within a day.
MS. SASSOON: After that, was FTX able to keep up with customer withdrawals?
CAROLINE ELLISON: No, it wasn't.
MS. SASSOON: And was Alameda able to repay its lenders in full?
MS. SASSOON: What happened on November 11, 2022?
CAROLINE ELLISON: I believe that was the day that FTX and Alameda declared bankruptcy.
MS. SASSOON: And at the time that Alameda and FTX declared bankruptcy, about how much money did Alameda still owe its lenders?
CAROLINE ELLISON: Its third-party lenders, do you mean?
MS. SASSOON: Yes.
CAROLINE ELLISON: Maybe in the ballpark of a billion dollars.
MS. SASSOON: Did there come a time after Alameda and FTX declared bankruptcy that you began meeting with federal prosecutors and special agents with the FBI?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Around when was that?
CAROLINE ELLISON: I think it was in December of 2022.
MS. SASSOON: And had you been arrested for any crimes at that point?
MS. SASSOON: What happened before you came to meet with the government?
CAROLINE ELLISON: The FBI searched my parents' house where I was staying and took my phone, computer, and other electronic devices, as well as my journal.
MS. SASSOON: Did those electronics contain some of the documents we looked at today?
CAROLINE ELLISON: Yes, they did.
MS. SASSOON: Did that journal contain some of those handwritten notes we looked at today?
CAROLINE ELLISON: That's right.
MS. SASSOON: When you met with the government, what kind of information did you provide?
CAROLINE ELLISON: I provided a lot of the information I've talked about here. I told them about what happened and the crimes that we had committed and who had been involved.
MS. SASSOON: Your Honor, I'm not going to wrap up within the next 15 minutes. I just wanted to check in when you think it's appropriate to take a break, if you would like to.
JUDGE KAPLAN: How much longer?
MS. SASSOON: Perhaps 25, 30 minutes.
JUDGE KAPLAN: We will take our break here. 3:30, folks.
(Recess)
(In open court; jury present)
JUDGE KAPLAN: The defendant and the jurors all are present. You may continue, Ms. Sassoon.
MS. SASSOON: Thank you.
BY MS. SASSOON:
MS. SASSOON: We were discussing the time that you started meeting with the government. Prior to that, in the final weeks before Alameda and FTX declared bankruptcy, did there come a time where you shared with other people what had happened with FTX customer money?
CAROLINE ELLISON: Yes, I did. I had a——an all hands meeting of all the staff at Alameda where I told them what had happened.
MS. SASSOON: Mr. Bianco, if you could show the witness Government Exhibit 414A.
MS. SASSOON: Do you recognize this?
CAROLINE ELLISON: Yeah, this is another excerpt from the small group chat.
MS. SASSOON: Government offers Government Exhibit 414A.
MR. COHEN: No objection, your Honor.
JUDGE KAPLAN: It's received.
(Government's Exhibit 414A received in evidence)
MS. SASSOON: Mr. Bianco, please publish this exhibit to the jury.
BY MS. SASSOON:
MS. SASSOON: This is a small group chat dated November 9, 2022, and you wrote, "Thinking about what to tell people at Alameda all hands. Right now I'm thinking a vibe of Alameda is probably going to wind down, if you don't want to stay or take some time off, no pressure, if you do want to help with stuff like making sure our lenders get repaid, it's super appreciated. Does that seem right?" What's an Alameda all hands?
CAROLINE ELLISON: These were meetings that we generally had once every two weeks where the whole staff of the company was invited to attend the meeting.
MS. SASSOON: And the defendant wrote back, "And maybe something about there being a future of some sort for those who are excited, but that you can't know for sure what it is." Why were you seeking the defendant's input about what to say at the meeting?
CAROLINE ELLISON: Because I generally sought his input on important decisions at Alameda, and I thought, like, what to tell Alameda employees about what was happening was one of those important decisions.
MS. SASSOON: And at that meeting did you end up sharing with your employees what had happened over the course of 2022?
MR. COHEN: Your Honor, I believe one of the jurors has his hand raised.
JUDGE KAPLAN: Yes, sir.
JUROR: The monitor is not working.
JUDGE KAPLAN: Let's get the monitors working. Thanks for telling us. Is it just one of the monitors or all of them?
JUROR: Just one.
JUDGE KAPLAN: Just one. Okay.
(Pause)
COURT CLERK: I'll have to call AV, Judge, and they can share for now.
JUDGE KAPLAN: Can you share with somebody on one side till we get it fixed?
MS. SASSOON: And I'll limit the remaining exhibits, your Honor.
JUDGE KAPLAN: Good.
BY MS. SASSOON:
MS. SASSOON: At that all hands——did the all hands meeting happen?
CAROLINE ELLISON: Yes, it did.
MS. SASSOON: And at that meeting did you share with your employees what had happened over the course of 2022?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: I want to turn——
MR. COHEN: Your Honor, for the reasons we discussed at the sidebar yesterday, we would object to the testimony about this meeting as hearsay.
JUDGE KAPLAN: My understanding is that this is what the witness said at the meeting, right? That's what you're eliciting?
MS. SASSOON: Yes, your Honor.
JUDGE KAPLAN: How is that hearsay?
MR. COHEN: Well, I didn't want to wait until the testimony was already in, your Honor. Could we just talk briefly at the sidebar.
MS. SASSOON: I don't intend any further questions about this. I don't know if that affects a sidebar.
MR. COHEN: If there are no further questions on this, then that's fine.
JUDGE KAPLAN: Okay. Let's go.
BY MS. SASSOON:
MS. SASSOON: Turning back to your meetings with the government, did you describe during those meetings your role in committing fraud on customers of FTX?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Did you discuss other crimes you had committed?
MS. SASSOON: And did you talk about the people that you had committed crimes with?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Did you tell the government about lies that you had told?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Why did you provide all of this information about your crimes and other people's crimes and your own lies to the government?
CAROLINE ELLISON: It was as part of the process to get a cooperation agreement with the government. I was hoping to get an agreement because I was hoping it would lead to a more lenient sentence for my crimes, and I also wanted to be honest and to take responsibility for what I had done.
MS. SASSOON: In your meetings with the government did you describe your personal relationship with the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And over the course of your on-again, off-again romantic relationship with the defendant, did you share personal writings with him?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: What kinds of things did you write to him about?
CAROLINE ELLISON: We both wrote each other Google Docs at various times with our thoughts on our relationship and our feelings.
MS. SASSOON: And at a very general level, what kinds of feelings did you share in these Google Docs?
CAROLINE ELLISON: I often shared feelings about being unhappy with our relationship.
MS. SASSOON: And what about any professional concerns?
CAROLINE ELLISON: Yeah, I also shared feelings about the intersection of our personal and professional relationship and how our relationship affected me at work.
MS. SASSOON: And at a very general level, what did you write about how the relationship affected you at work?
MR. COHEN: Objection.
JUDGE KAPLAN: Ground.
MR. COHEN: Relevance.
MS. SASSOON: Your Honor, I expect that this is going to be inquired about on cross-examination.
JUDGE KAPLAN: What do you say to that, Mr. Cohen?
MR. COHEN: It may well, your Honor, but this question just posed has an appropriate objection to it.
JUDGE KAPLAN: Overruled.
CAROLINE ELLISON: Sorry. Could you repeat the question.
MS. SASSOON: I believe I asked: What sorts of professional concerns did you have that you shared with the defendant?
CAROLINE ELLISON: Yeah. I shared concerns about our personal and professional relationships affecting each other. For instance, if I messed——if I messed something up at work and Sam gave me negative feedback on that, that would affect our personal relationship as well and sort of vice versa.
MS. SASSOON: And how did that make you feel?
CAROLINE ELLISON: It——it made me feel bad. I mean, it made me feel like sort of a——an unequal partner in our relationship.
MS. SASSOON: Did you ultimately plead guilty to a cooperation agreement?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And how many crimes did you plead guilty to?
CAROLINE ELLISON: I believe it was seven counts.
MS. SASSOON: Mr. Bianco, can you show the witness Government Exhibit 3550-079.
MS. SASSOON: Do you recognize this document, Ms. Ellison?
CAROLINE ELLISON: Yes, I do. This is my cooperation agreement with the government.
MS. SASSOON: The government offers Government Exhibit 3550-079.
MR. COHEN: No objection.
JUDGE KAPLAN: Received.
(Government's Exhibit 3550-079 received in evidence)
MS. SASSOON: And Mr. Bianco, if you could publish the last page of this agreement. And publish this.
BY MS. SASSOON:
MS. SASSOON: Did you sign this on December 19, 2022?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And before you signed it did you review it with your attorney?
MS. SASSOON: And after you signed it did you plead guilty to seven crimes?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And why did you plead guilty to the crimes in your cooperation agreement?
CAROLINE ELLISON: Because I believe I am guilty and because it was part of the terms of the cooperation agreement.
MS. SASSOON: And if we could go back to the first page.
MS. SASSOON: Under this agreement you pleaded guilty to wire fraud and wire fraud conspiracy on customers of FTX, as well as commodities fraud conspiracy. Does that relate to what you've described in your testimony about Alameda using FTX customer money?
CAROLINE ELLISON: Yes, it does.
MS. SASSOON: And under this agreement you pleaded guilty to wire fraud and wire fraud conspiracy against Alameda's lenders. What does that relate to?
CAROLINE ELLISON: That relates to what I testified about regarding the false balance sheets that we provided to lenders.
MS. SASSOON: And when you say "we," who do you mean?
CAROLINE ELLISON: Sam and me.
MS. SASSOON: You also pleaded guilty to securities fraud conspiracy. What does that relate to?
CAROLINE ELLISON: That relates to the investors in FTX.
MS. SASSOON: And in what ways did you participate in a conspiracy to defraud the investors in FTX?
CAROLINE ELLISON: I was aware that FTX was not disclosing Alameda's borrowing and line of credit to FTX investors, and I made false statements on, you know, Twitter and in this Bloomberg article that I knew FTX investors were one of the audiences of those statements.
MS. SASSOON: Were you directly involved in communicating directly with FTX's equity investors in 2021?
MS. SASSOON: You testified some time ago about an FTX audit. Were you aware of any other information that was being concealed from FTX's auditors besides customer balances?
MR. COHEN: Objection, leading.
JUDGE KAPLAN: Rephrase.
MS. SASSOON: What, if anything, did you learn about information that was concealed from FTX's auditors?
CAROLINE ELLISON: I learned that FTX had loaned money that it had raised from investors totaling $1.6 billion to Alameda and that that had been concealed from FTX's auditors.
MS. SASSOON: Did you discuss with the defendant that $1.6 billion of FTX investor money had been transferred to Alameda?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: And in what forum was that discussed?
CAROLINE ELLISON: We discussed it over Signal and in in-person conversations.
MS. SASSOON: And what, if anything, were you told about why $1.6 billion of FTX investor money had been transferred to Alameda?
CAROLINE ELLISON: That it would be useful for Alameda's trading.
MS. SASSOON: And what, if anything, did you learn about how this $1.6 billion of FTX investor money transferred to Alameda, how it was accounted for in FTX's records?
CAROLINE ELLISON: So there was money that was transferred from FTX's bank accounts to Alameda's bank accounts, and then to offset that, there were negative ledger entries in Alameda's main account on FTX, but then there were also, offsetting to that, positive ledger entries in a subaccount that Alameda had on FTX.
MS. SASSOON: And what did you understand was the purpose of these offsetting entries?
CAROLINE ELLISON: I was told that it was for FTX auditing purposes.
JUDGE KAPLAN: Where did you get this information from?
CAROLINE ELLISON: I believe it was Nishad Singh who told me this, your Honor.
MS. SASSOON: And was this——
MR. COHEN: Objection.
JUDGE KAPLAN: Ground?
MR. COHEN: Speculation.
MS. SASSOON: Your Honor——
JUDGE KAPLAN: What's the speculation?
MR. COHEN: I think she just said she believes, she didn't know.
MS. SASSOON: Your Honor, this is admissible under 801(d)(2)(E).
JUDGE KAPLAN: I believe this is Wednesday.
MR. COHEN: I didn't hear your Honor.
JUDGE KAPLAN: I believe this is Wednesday. That's not speculation.
MR. COHEN: Okay. All right.
JUDGE KAPLAN: Overruled.
MR. COHEN: Your Honor, withdrawn.
CAROLINE ELLISON: Yes, sorry. I recall that it was Nishad Singh who told me. I'm sorry if I misspoke.
BY MS. SASSOON:
MS. SASSOON: And when you were looking into the accounting for this FTX investor money, did you discuss that with the defendant?
CAROLINE ELLISON: Yes, I did.
MS. SASSOON: Were you aware of any FTX losses that——
JUDGE KAPLAN: I'm sorry. You discussed it with the defendant. What did he say?
CAROLINE ELLISON: We discussed——it was a discussion where we were trying to reconcile Alameda's and FTX's records. Sam was present as well as me and people from FTX, and we all went over our versions of what had happened and eventually agreed on——that we all were on the same page about what had happened.
JUDGE KAPLAN: Thank you.
BY MS. SASSOON:
MS. SASSOON: And did Alameda ultimately repay to FTX the FTX investor money that had been transferred to Alameda?
CAROLINE ELLISON: We repaid some of it but not all.
MS. SASSOON: What, if any, other information were you aware of that was concealed from FTX investors?
CAROLINE ELLISON: I was aware that in 2021, FTX suffered a large loss——around $800 million——from the malfunctioning of its margin system and that this loss was——Alameda took on this loss and it wasn't disclosed to FTX investors.
MS. SASSOON: And this loss, did it pertain to particular cryptocurrency?
MR. COHEN: Objection. Lack of foundation.
JUDGE KAPLAN: Sustained.
MS. SASSOON: Ms. Ellison, did there come a time when the defendant discussed with you any losses that were concealed from FTX investors?
CAROLINE ELLISON: Yes, the loss that I was just talking about was one that I discussed with Sam.
MS. SASSOON: And can you describe what you learned about this loss.
JUDGE KAPLAN: From Sam.
MS. SASSOON: From Sam.
CAROLINE ELLISON: From Sam, I learned that FTX had——that there had been a trader on FTX who had taken a large position in BTMX and withdrawn Bitcoin and other, more liquid currencies from FTX, and that he said that Alameda would have to take on the BTMX and try to sell it, which we did, but ended up selling it at a very large loss.
MS. SASSOON: What, if anything, did the defendant say about why Alameda had to take on this $800 million loss?
CAROLINE ELLISON: He said that he didn't want it on FTX's balance sheet.
MS. SASSOON: And did he say why?
CAROLINE ELLISON: I don't recall if he said specifically.
MS. SASSOON: Did he say anything about FTX investors?
CAROLINE ELLISON: I don't recall.
MS. SASSOON: And you mentioned the coin BTMX. Were there any other cryptocurrencies involved in this $800 million loss?
CAROLINE ELLISON: Yeah, the customer on FTX was also trading MobileCoin, and some of the losses came from that as well.
MS. SASSOON: Did this incident occur prior to the defendant raising additional investor funds in late 2021?
CAROLINE ELLISON: Yes, it did.
MS. SASSOON: While you worked at FTX what was the value of your account on FTX around its peak?
CAROLINE ELLISON: I think at its peak it was close to a billion dollars.
MS. SASSOON: And what happened to that account?
CAROLINE ELLISON: Well, the billion dollars was coming from the cryptocurrencies FTT and Serum, which then went down a lot and became worthless or almost worthless.
MS. SASSOON: Ms. Ellison, have you been sentenced?
CAROLINE ELLISON: No, not yet.
MS. SASSOON: What's your understanding of the maximum sentence that you are facing?
CAROLINE ELLISON: It's——the maximum is 110 years in prison.
MS. SASSOON: And what's your understanding of whether there will be a financial component to your sentence?
CAROLINE ELLISON: Yeah, my understanding is that there will also be a fine and I will have to make restitution to the victims of the crimes.
MS. SASSOON: What's your understanding of what you are required to do under the cooperation agreement?
CAROLINE ELLISON: My understanding is that the requirements are that I assist the government with this investigation and provide truthful information, that I testify in court if asked and testify truthfully, and that I refrain from committing any further crimes.
MS. SASSOON: What's your understanding of what the government will do if you fulfill those obligations?
CAROLINE ELLISON: The government will write a letter to the judge at my sentencing outlining the crimes that I've committed and discussed with them and also the cooperation and assistance that I've given.
MS. SASSOON: As far as you understand it, does the outcome of this trial have any bearing on whether the government will submit that letter?
CAROLINE ELLISON: My understanding is that it does not.
MS. SASSOON: Have you been promised what sentence you will receive?
CAROLINE ELLISON: No, I haven't been promised any sentence.
MS. SASSOON: What's your understanding of who will decide your sentence?
CAROLINE ELLISON: The judge.
MS. SASSOON: One moment, your Honor.
JUDGE KAPLAN: Yes.
MS. SASSOON: No further questions, your Honor.
JUDGE KAPLAN: Thank you. Mr. Cohen.
MR. COHEN: Thank you, your Honor.
CROSS EXAMINATION BY MR. COHEN:
MR. COHEN: Maybe just a few questions.
CAROLINE ELLISON: Okay.
MR. COHEN: Good afternoon, Ms. Ellison.
CAROLINE ELLISON: Good afternoon.
MR. COHEN: I'd like to talk about some terms that you used during your testimony. I want to see if I understand them.
CAROLINE ELLISON: Okay.
MR. COHEN: You spoke a lot about something called the fiat@ account. Do you recall that, ma'am?
CAROLINE ELLISON: Yes, that's right.
MR. COHEN: And you also spoke a lot about something called the info@ account.
CAROLINE ELLISON: Yeah.
MR. COHEN: I just want to make sure I understand the difference here. Now the fiat@ account was an account that, well, that related to bank accounts that Alameda had where it was accepting fiat or dollars from customers, correct?
CAROLINE ELLISON: That's correct.
MR. COHEN: Okay. And I believe you referred either to the Alameda bank accounts or accounts for an entity called North Dimension?
CAROLINE ELLISON: That's right.
MR. COHEN: So if I understand this correctly, fiat is just another word for dollars, correct?
CAROLINE ELLISON: Dollars, or other currency, like euros.
MR. COHEN: Euros, British pounds, but for our purposes, let's just talk dollars; is that fair?
CAROLINE ELLISON: Yeah.
MR. COHEN: Okay. So a customer could wire dollars into this bank account that Alameda had; that's correct?
CAROLINE ELLISON: That's my understanding, yes.
MR. COHEN: All right. Now at the same time this bank account had other dollars in it as well, for example, from Alameda's revenues.
CAROLINE ELLISON: That's right.
MR. COHEN: From Alameda's profits.
CAROLINE ELLISON: That's right.
MR. COHEN: You mentioned that Alameda traded on other exchanges, correct?
CAROLINE ELLISON: That's correct.
MR. COHEN: So if it received transfers from those exchanges, in dollars, some of those dollars might wind up in the account.
CAROLINE ELLISON: That's right.
MR. COHEN: Okay. And I take it these dollars weren't labeled, correct?
CAROLINE ELLISON: That's right.
MR. COHEN: So if customer Alice sent in a dollar and customer Bob sent in a dollar and there was dollars from revenues and profits, they were all just in one account.
CAROLINE ELLISON: That's right.
MR. COHEN: Okay. Now when dollars came out of the fiat account, they came out to pay withdrawals to customers, correct?
CAROLINE ELLISON: That's right.
MR. COHEN: Or they could come out, for example, to pay Alameda's rent or its payroll.
CAROLINE ELLISON: That's correct.
MR. COHEN: Or for its investments.
CAROLINE ELLISON: That's right.
MR. COHEN: And again, those dollars also were not labeled; dollars are dollars, right?
CAROLINE ELLISON: Mm-hmm, that's right.
MR. COHEN: Okay. Now I want to focus this next question on the period before 2022. I have a feeling we'll talk a lot about 2022 tomorrow, but——
CAROLINE ELLISON: Mm-hmm.
MR. COHEN: Is it fair to say that before that period of time you did not track how these dollars went out and where they were going to in terms of whether they were going to a customer or to pay the payroll or to pay the rent?
CAROLINE ELLISON: I mean, we did have a transfer tracking system for all of the transfers that went out of our accounts.
MR. COHEN: Okay. Fair enough. Fair enough. Okay. So that was the fiat@ account. So it actually was——really what we're talking about is the bank account, and then there was a separate way to track it, or separate ledger adjustment called FTX/.com, correct?
MS. SASSOON: Objection, form.
JUDGE KAPLAN: Sustained.
MR. COHEN: Okay. Let me try again. What did the FTX/.com refer to?
CAROLINE ELLISON: Sorry. You said FTX/.com?
MR. COHEN: Underscore. Excuse me.
CAROLINE ELLISON: Underscore.com?
MR. COHEN: I'm sorry. FTX_fiat, what did that refer to?
CAROLINE ELLISON: That was Alameda's internal labeling of the fiat@ftx.com account.
MR. COHEN: The account we were just talking about.
MR. COHEN: Okay. Now let me try to talk now about the info@ account, okay? That was the account that Alameda had on the exchange, on the FTX exchange?
JUDGE KAPLAN: I'm sorry. I just want to make sure I got the last point. FTX_fiat? You talked about that, yes?
CAROLINE ELLISON: Yeah. I was saying that was the same account as the fiat@ftx.com account.
JUDGE KAPLAN: I thought I understood, and now I'm thoroughly confused.
CAROLINE ELLISON: Sorry, your Honor.
MR. COHEN: Your Honor, if I might, I think I know where your Honor is going.
JUDGE KAPLAN: Yes, okay.
BY MR. COHEN:
MR. COHEN: There are two things going on here, I believe, Ms. Ellison. Correct me if I'm wrong. One is the bank account itself, and we've been calling it today the fiat@ account; is that correct?
CAROLINE ELLISON: When I use——when I say fiat@ account, I'm thinking of the account on the FTX website and not a bank account.
MR. COHEN: Okay. Okay. And then there's also the ledger entry which you were just describing to his Honor.