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Who is Caroline Ellison, the trader at the center of FTX’s collapse?

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Caroline Ellison and Sam Bankman-Fried worked together to build a cryptocurrency empire for four years. Ellison ran a hedge fund associated with FTX, a cryptocurrency exchange founded by Bankman-Fried in 2019.

Outside of work, the two had a lot in common. Both of them had excellent academics, studied mathematics at prestigious universities, and emphasized the importance of donating to make the world a better place. Both were reportedly living in luxury penthouses in the Bahamas with co-workers and were sometimes romantically involved.

But now Ellison has parted ways with Bankman Freed in a big way. She is cooperating with federal prosecutors who have accused Ellison of orchestrating one of the biggest financial frauds in US history.

Last month, Ellison, 28, plead guilty She, Bankman-Fried, and other FTX executives were charged with conspiring to steal customer funds, invest in other companies, make political contributions, and purchase expensive real estate, and face up to 110 years. will be sentenced to imprisonment. December 19th At the hearing, Ellison apologized to FTX customers and investors, saying he knew what he had done was wrong.

Bankman-Fried, 30, is likely to appear in court on January 3 and plead not guilty, according to people familiar with the matter.in numerous interviews his December 12 arresthe argued that he was guilty only of bad management and that he did not deliberately deceive anyone.

Former FTX Chief Technology Officer Gary Wang, 29, also pleaded guilty. Lawyers for Ellison and Wang did not respond to requests for comment. Bankman-Fried spokesman Mark Botnick declined to comment.

Ellison’s deal with the government could be bad news for Bankman-Fried. The fact that she and Wang quickly pleaded guilty and signed the contract suggests they will testify against Bankman-Fried in court, said a Los Angeles-based trial attorney and former federal prosecutor. Neama Ramani said. “They are working perfectly together,” he said.

If Ellison provides prosecutors with substantive assistance, the government will ask judges to take it into account when she is finally sentenced. For this reason, they often agree to testify against alleged co-conspirators. If Ellison backs the government, Rahmani said her sentence could be reduced to her five years, compared to Bankman-Fried’s likely to be from her ten to her twenty. He said he presumes that there is a

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Ellison’s rise to become one of the most important figures in the crypto world was rapid. In an interview in July 2020 FTX’s internal podcastshe described her childhood, education, and a quick tour of Wall Street before landing at Alameda Research, a Bankman-Fried-owned hedge fund closely integrated with FTX.

Bankman-Fried’s parents are law professors at Stanford University, while Ellison’s parents are economics professors at the Massachusetts Institute of Technology. Her father, who wrote mathematics textbooks for her children, got her into her mathematics at an early age. She worked on a thick Harry Potter book when she was five because she couldn’t wait for her parents to read her.

Her father encouraged her and her sisters to enter a math contest. She continued through middle school and high school before studying mathematics at Stanford University in 2012. Boston,” she said.

Uncertain about her degree, in her sophomore year she applied for an internship at a quantitative trading firm that used complex math and algorithms to predict market movements.

Ellison had two internships at mass retailer Jane Street Capital and received a job offer after college, she said. There she met Bankman-Fried, who worked for several years in her New York office at the company. In 2017, he quit and moved to the Bay Area, and a year later Ellison asked to meet him. “He canceled several times, but he finally said yes,” she said.

Bankman-Fried told her about his recently started cryptocurrency trading firm, Alameda Research. Soon after, she quit Jane Street and joined him. “It seemed like too cool an opportunity to pass up,” she said.

Is crypto the house of cards?

In a Tumblr blog linked to his Twitter account, Ellison said he never got involved with cryptocurrencies as a “true believer.” “When you think about it, it’s mostly scams and memes,” reads one post. Archive version of your Tumblr account. But she sees value in the core technology behind cryptocurrencies that allows transactions without the intermediation of banks or governments.

The rest of the post dated March 24, 2022 states, “Authoritarian governments are a serious threat to civilization, and if they seem completely insane, it could ultimately matter. .

But Ellison’s job at FTX was not to fend off authoritarian governments, but to profit from the explosion of interest and investment in cryptocurrencies. The company was one of the biggest winners of the massive cryptocurrency boom of 2020-2021 when ordinary people around the world invested in Bitcoin, Ethereum and other tokens. , swelled to about $3 trillion, about the same as the gross domestic product of the UK.

FTX has quickly grown to be one of the leading places where people can buy, sell and speculate in cryptocurrencies. The company’s ads featured his sports stars like Tom Brady and Stephen Curry, and paid millions of dollars for the stadium naming rights for his Miami Heat basketball team. Many users invested in margin. That is, they were making financial bets with money borrowed from exchanges in the hope that their investment would pay off. By the end of 2021, FTX was processing around $350 million in cryptocurrency trades per day, making a percentage of each trade profitable.

Alameda was technically separate from FTX and invested and traded with the goal of making a profit like any other hedge fund. However, it played a key role as a market maker for the FTX exchange itself, intervening in the buying and selling of tokens and other digital assets. Massively increase the liquidity of the exchange and make it more attractive to customers.

In an interview, Ellison talked about the difficulty and excitement of the job.

“There are a lot of people out there who are very smart but aren’t necessarily good at the very messy world of trading, especially crypto trading,” she said. El Momento Crypto Podcast Posted May 25, 2022. So you have to make your best guess based on what you see. ”

She has been promoted in the company, and Bankman-Fried will join Sam Trabucco as co-CEO in 2021. In August 2022, Trabucco stepped down and Ellison became sole leader of his Alameda. (Trabucco did not respond to a request for comment, and his whereabouts are unknown.) In a January 2021 podcast, Ellison explained how she was in charge of the deal, but Bankman-Fried’s Involvement decreased over time.

The job was very lucrative. At its peak, FTX was valued at his $32 billion by venture capital investors, according to the Bloomberg Billionaires Index, and in the spring of 2022 his Bankman-Fried net worth will reach his $26 billion. Bankman-Fried, Ellison, and a group of colleagues Luxurious Penthouse in Nassau, Bahamas Worth $40 million.The employees were romantically involved with each other, and Bankman-Fried and Ellison dated occasionally. report From the crypto news outlet CoinDesk. Stimulants were part of the lifestyle.

“Nothing makes you understand how a lot of the human experience without regular drugs is absurd like regular amphetamine use,” Ellison said. murmured last year.

Like Bankman-Fried, Ellison was a proponent of it. effective altruism, is a philanthropic philosophy that encourages smart young people to get high-paying jobs, accumulate wealth, and donate. She found the movement while at Stanford, surrounded by her smart, quick-witted people like her.

“I think the ultimate goal, or one of my most important goals, is to maximize my impact,” she said in a July 2020 podcast interview. “Working at Alameda is good in that regard for several reasons: the direct thing is to make money.”

Bankman-Fried himself had pledged billions of dollars to the cause. In an interview on the internal FTX podcast posted on January 21, 2021, Ellison again talked about how. She finds value in the work she does.

“Yes, it can be stressful at times, but feeling needed and feeling valued in what you do gives you a sense of purpose and meaning,” says Ellison. said.

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But behind the scenes, FTX allegedly broke the law, according to federal prosecutors. The company took customer deposits and lent them to Alameda, who used the money to make risky transactions, invest in other companies, and donate to politicians and effective altruistic groups. .

Alameda had special access and privileges to the FTX exchange that corporate customers did not have. Basically, you were free to borrow without having to repay the loan or face the same consequences if you lost money on the trades you made with the borrowed funds.Ellison knew as far back as 2019, she testified Early this month.

Bankman-Fried told The New York Times in November: DealBook Conference We have never intentionally mixed funds between Alameda and FTX, and we were surprised by the size of Alameda’s exposure on the FTX exchange.

“Obviously, I made a lot of mistakes. said.

Alameda borrowed large sums of money from other cryptocurrency lenders to fund Bankman-Fried’s investments and donations, but as cryptocurrency prices plummeted through 2022, those lenders were forced to I requested a refund. Ellison and her colleagues paid it back with customer money, she said, and users of the platform were unaware that something was going on.

And when questioned by investors, she, Bankman-Fried, and other colleagues agreed to lie, revealing the company’s true financial position and the special incentives for Alameda to use client assets at its disposal. He covered up the arrangement, Ellison told the judge.

“I have agreed with Bankman-Fried and others to provide Alameda lenders with materially misleading financial statements,” she said. “I’m really sorry for what I did. I knew it was wrong.”

The judge asked if she also knew it was illegal.

Dalton Bennett and Nitasha Tiku contributed to this report.

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