Sam Bankman-Fried thought he was above basic ethics like ‘don’t lie,’ ex tells NYC jury in FTX fraud trial

NEW YORK — As he pilfered billions from customers of his global currency exchange FTX, Sam Bankman-Fried disregarded moral codes like "don't steal" — then blamed the woman he put in charge when things went south, a Manhattan jury heard Wednesday.

"He said that he was a 'utilitarian,' and he believed that the ways that people try to justify rules like 'don't lie,' 'don't steal,' under utilitarianism, didn't work," the embattled former billionaire's convicted associate and ex-girlfriend, Caroline Ellison, alleged during her second day on the witness stand in Manhattan federal court.

"He thought the only moral rule that (mattered) was what maximized utility," she said, adding that meant whatever created "the greatest good for the greatest number" of people.

"I think it made me more willing to do things like lie or steal over time."

Prosecutors allege Bankman-Fried's lies and large-scale theft of $8 billion didn't make anyone's life better, seeing some FTX customers' life savings gambled away and his associates facing life behind bars.

Bankman-Fried tapped the 28-year-old Ellison to run his Hong Kong-based hedge fund Alameda Research and dated her on and off. The government's star witness — who pleaded guilty to wire fraud and money laundering after his arrest — is cooperating for a lesser prison sentence. She said he continuously directed her to secretly pay off Alameda's sky-high debts through a backdoor line of credit from FTX.

The fallen crypto king, commonly referred to by his initials "SBF," spent much time cultivating his image, Ellison told jurors, noting his just-rolled-out-of-bed look was by design and that he believed his "valuable" trademark shaggy hairstyle earned him higher bonuses.

Ellison said that FTX's reputation as a highly regulated, safe place for customers to keep their money was equally important. Jurors have seen it endorsed by A-list celebrities, including Larry David and Tom Brady, in a Super Bowl ad played at the trial.

"I thought that was definitely an inaccurate image," Ellison said. "Because in 2022, Alameda was borrowing around $10 billion of (FTX) customer funds that we had no way to repay."

Bankman-Fried stopped her from sharing that staggering figure with a concerned Alameda lender in June 2022. By that time, she testified she was feeling "constant dread" about a possible bank run. Confronted with her accurate calculations, Bankman-Fried told Ellison, "This looks bad," and ordered her to draw up dishonest balance sheets.

Throughout the fraud, Ellison said Bankman-Fried had some wild ideas for how to cover his debts, like courting Saudi Crown Prince Mohammed bin Salman as a possible investor. When $1 billion in Alameda's trading accounts was frozen in China in 2021, Ellison said they tried to bribe officials with $150 million after failing to withdraw cash under fake accounts in the names of Thai sex workers.

Bankman-Fried was charged for that alleged bribery scheme after his extradition, but prosecutors withdrew it to respect a treaty with the Bahamas. He may face trial on several charges at a second trial in 2024.

In August 2022, not long before the walls came crashing down, Ellison recalled Bankman-Fried trying to blame her during a blowout argument in the Bahamas, where he ran FTX.

Ellison said Bankman-Fried told her she should have been more careful to hedge Alameda's money movements earlier in the year – failing to recognize "the fundamental problem" was borrowing billions he couldn't pay back.

"I got very upset. I started crying," she recounted. "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."

Her worst fears came true in November 2022 when thousands of FTX customers sought to withdraw their funds in vain after Alameda's numbers were leaked. Shortly after, both declared bankruptcy, Bankman-Fried was handcuffed, and Ellison started cooperating with the feds.

"That was overall the worst week of my life," Ellison said, crying as she spoke of the unexpected relief. "I didn't have to lie anymore."

Bankman-Fried maintains his innocence.

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