Sam Bankman-Fried was a terrible boyfriend

I have some shitty ex-boyfriends, but none of them made me CEO of their sin-eating hedge fund while refusing to give me shares and bragging that there was a 5 percent chance they would become president of the United States. Joined. States, you know? Absolutely counting my blessings after Caroline Ellison’s first day on the stand. I wonder how many of the nine women on the jury are doing the same.

Ellison was the director of Alameda Research, the aforementioned hedge fund, during its and FTX’s implosion. He already pleaded guilty to criminal charges stemming from one of the worst romantic relationships I’ve ever heard of, and his testimony was widely anticipated before the trial. Today, that took the form of discussing a damning spreadsheet, one he prepared for his ex and boss Sam Bankman-Fried, now accused in a criminal fraud trial.

The day started promisingly for the defense when he questioned Gary Wang, FTX’s chief technology officer and co-owner of FTX and Alameda. Christian Everdell, one of Bankman-Fried’s defense attorneys, couldn’t undo the damage from last week’s code review. But he managed to shake off the rust long enough to make Wang seem less trustworthy, drowning the jury in confusing technicalities.

Last week, Wang testified that Alameda gained access to a special line of credit and an option to take its balance to negative without triggering liquidation, something he said other accounts at FTX did not get. Everdell attempted to undermine this claim by talking about the spot margin program, which allows users to lend assets to each other for margin trading. In those cases, it was possible to have a negative balance in a specific currency. However, it was not possible for those accounts to avoid liquidation, as Wang testified that Alameda could do, or to have a in general negative balance. But I bet the defense hopes jurors will be confused when they think about this.

Wang didn’t exactly help himself either. Apparently, what Wang said in court contradicted something he had said in previous interviews with the government about market creation. He says “apparently” because Everdell was probably giving him his earlier testimony to refresh her memory of him, but Wang insisted that he didn’t remember it. In any case, whatever was shown to Wang was not presented as evidence or shown to the court. I got the gist, though, and I bet the jury got it too: probably the strongest work the defense has done so far.

But at the end of the day, all of that seemed like a sideshow. Bankman-Fried had been vibrating slightly during Wang’s testimony. During Ellison’s testimony, his bouncing became more noticeable.

Ellison was hunched over as she walked into the courtroom, wearing a dusty pink dress with a gray jacket over it, looking less like an executive than a girl who borrowed her boyfriend’s coat because she’s cold. When the prosecution asked her to identify Bankman-Fried, she had trouble finding him and she looked around the courtroom for more than 20 seconds; She was apparently incognito with her new haircut. After she saw him, they asked her to identify him, which she did by identifying him as wearing a suit. This caused laughter from the rest of the defense table, also all dressed in suits.

He listed crimes to which he had already pleaded guilty and added that Bankman-Fried “directed me to commit these crimes,” Ellison said. (Fraud, conspiracy to commit fraud, and money laundering, in case you were wondering.) “We were ultimately left with about $14 billion, some of which we couldn’t pay back.” He tilted his head down to answer the questions and then raised it when he finished his answer.

According to Ellison, Alameda struggled from his first moment there in 2018. “Shortly after I started, I learned that the company was in worse shape than I thought,” Ellison said. Initially, Alameda had been financed with loans “from acquaintances,” he said, and those loans were withdrawn a few weeks after his arrival. (There was a staff revolt within Alameda Research, over the loss of millions and general financial chaos, according to Michael Lewis Becoming infinite.) Ellison asked Bankman-Fried why she hadn’t shared the company’s shaky circumstances in the job posting. “He didn’t know how to tell me,” he said.

Ellison also had, of course, a more personal relationship with Bankman-Fried. (A juror who had been asleep during a discussion about the FTT token woke up when he began discussing it.) The two began sleeping together in the fall of 2018, on and off. At the time, she was a trader and Bankman-Fried was the CEO. They didn’t come out until later, twice. Their first relationship spanned from summer 2020 to summer 2021; They agreed to keep it secret. (Some people found out, as is often the case.) The second time, from fall 2021 to spring 2022, they lived together.

That gave Ellison unusual insight into his character. “He was very ambitious,” he said. In addition to telling her about his presidential chances, he also told her that if there was a coin toss where tails destroyed the world and heads made the world twice as good, he would toss the coin. He called this being “risk neutral,” which seems like a fancy way of saying that he was a gambling addict.

She was named co-CEO of Alameda with Sam Trabucco in 2021, while she and Bankman-Fried parted ways, and CEO in 2022. The goal, Bankman-Fried told her, was to “optically” separate Alameda Research and FTX. “The whole time we were dating, he was my boss at work,” she said. They broke up because she wanted more from the relationship; Bankman-Fried seemed distant and did not pay enough attention to him.

Bankman-Fried did not grant shares to Ellison, even though she requested it; He told her it would be too complicated. Instead, she received a salary of $200,000, even as CEO, and twice-yearly bonuses ranging from $100,000 to $20 million.

Initially, Alameda and FTX were “very integrated,” Ellison said. They were run by the same team, from the same office. And when Alameda was looking for funds, Bankman-Fried told Ellison that FTX would be a good source of capital. Alameda Research’s $65 billion line of credit had allowed it to avoid having to provide collateral. There was no contract or written terms, he testified. She was also not visible to FTX auditors: she had posed the question to Bankman-Fried and he told her not to worry about it.

Alameda’s line of credit, which was taken in increments of $100,000 to $10 million at a time, was used for negotiating. The use of effectively unlimited funds “allowed us to make profitable trades that we otherwise could not have made,” Ellison testified.

Client funds were also used when Bankman-Fried bought back FTX shares from Binance, an early investor, in the summer of 2021. Bankman-Fried told Ellison it was “really important,” otherwise, ” “Binance would do things to mess with FTX.” Ellison says she told him Alameda didn’t have the money. Bankman-Fried then took $1 billion of FTX client funds to buy Binance, the first time Ellison recalled such a large amount. It was Bankman-Fried’s decision, she said, since he was the CEO of FTX.

There was also the FTT token, which was created by Bankman-Fried and Wang. Alameda got its war chest (60 to 70 percent of the initial supply) for free, while seed investors got FTT at 10 cents per currency, and the FTT was listed for the first time at $1 per currency. Bankman-Fried considered $1 per coin to be psychologically important, Ellison said, and was told to buy FTT using Alameda if its price fell below a dollar.

FTT was one of several “Sam coins,” a nickname for tokens that Bankman-Fried was heavily involved in and owned many of, either personally or through Alameda. Those coins were almost certainly worth less than the value shown on the balance sheet, because trying to sell them all at once would cause prices to fall. Bankman-Fried instructed him to put those coins on the balance sheets that Alameda showed to lenders, although he considered it “somewhat misleading.”

Alameda was also getting loans from third-party lenders, such as Genesis, because when FTX started, there weren’t many customer funds to borrow, Ellison testified. That was the basis of the worst of his testimony…and the spreadsheet from hell.

Ellison said he prepared the spreadsheet at Bankman-Fried’s request in the fall of 2021 and shared it with him. The point was the risk analysis surrounding the payment of Alameda’s loans if Genesis, his lender, abruptly withdrew them. Bankman-Fried wanted to use $3 billion for venture investments, so Ellison was calculating what that would do to Alameda’s risk. In the current scenario, if things went wrong, she estimated there was a 30 per cent chance they would be unable to meet loan drawdowns. If Bankman-Fried used $3 billion to make investments, there was a 100 percent chance they would not be able to honor withdrawals, even with FTX customer funds.

The problem here wasn’t really the math, which seemed pretty arbitrary. It was that Ellison’s calculations assumed that Alameda could borrow $1.8 billion in regular dollars and $1.5 billion in cryptocurrencies from FTX. The spreadsheet makes this clear with a row labeled “FTX loans,” which Ellison said were client funds.

Meanwhile, echoing Bankman-Fried and Ellison’s romantic relationship, FTX maintained close private ties to Alameda, although publicly kept them at arm’s length. On January 14, 2022, Bankman-Fried tweeted, “We’re launching a $2 billion venture fund: FTX Ventures!” Those funds came from Alameda, Ellison testified. But Bankman-Fried did not want to make public the source of the funds. He said he thought the Alameda brand was less good and that he didn’t want his name associated with it. Alameda also purchased Robinhood shares for Bankman-Fried, who moved them into a vehicle called “Emergent Fidelity Technologies” to avoid association with Alameda.

The day ended with a document that Ellison and Bankman-Fried had shared, with their comments appearing in bubbles throughout the main text. Ellison wrote that she was concerned “both about the actual leverage and the presentation on our balance sheet.” Bankman-Fried responded with a note: “Yes, and it could also get worse.”

In fact, things got worse.