Former FTX CEO who turned on Bankman-Fried took risks

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Former FTX CEO who turned on Bankman-Fried took risks

Caroline Ellison, a leading witness in the US government's case against Sam Bankman-Fried, the former CEO of the bankrupt cryptocurrency exchange FTX, is a key figure in the government's investigation. And what became apparent during her testimony is that, compared with three other key lieutenants who've all turned on their former boss, she took similar risks for far smaller rewards.

The cofounder and former CTO of FTX, Gary Wang, had a 16% stake in FTX and a 10% stake in Alameda. Nishad Singh, a former director of engineering at FTX, had a controlling interest in the company, according to Michael Lewis' recent SBF report. In addition, Bankman-Fried owned the lion's share--90% of Alameda and more than half of FTX, Lewis said.

Moreover, the three siphoned billions of dollars in personal loans out of Alameda-which prosecutor Danielle Sasson called 'loans to insiders'-Ellison took out a comparatively minuscule $1.3 million to invest in a startup, she said. Even Ryan Salame, co-chief of FTX's Bahamas subsidiary, whom past witnesses don't usually cite as part of the FTX inner circle, donated $35 million for Republican political campaigns.

In most respects, Ellison was handsomely compensated during her time working for Bankman-Fried, whom she also dated on and off. She had a salary of $200,000, including a 20 million haul in 2021, half of which she said she invested in a startup.

Her comparative absence of compensation with those in the boys' club of Bankman-Fried, Singh, and Wang highlights a continuing theme throughout her testimony: how she, the only woman in Bankman-Fried's inner circle, answered to him and his lieutenants, not the other way around.

Bankman-Fried has also laid the blame for FTX's collapse at Ellison's feet, saying she didn't properly hedge against risk. Cohen told the New York Times that his client had been misunderstood.

Ellison, though, repeatedly emphasized in her testimony that it was Bankman-Fried who told her to ignore the considerable risks Alameda was running. In late 2021, she told Bankman-Fried that it would be incredibly risky for Alameda to take out $3 billion in loans to invest in startups-it would further imbalance the hedge fund's balance sheet. Even after she raised her concerns, Bankman-Fried said that he planned to go ahead and take out billions of dollars in loans, unveiling FTX Ventures in January 2022.

At one point, at one point, prosecutors asked Ellison about her ex's appetite for risk. If there were a 50% chance that a coin flip would lead to the world being 'twice as good', she said, he'd be happy to flip a coin if it turned up tails and the world was destroyed.