The Stunning Revelations From Caroline Ellison’s Second Day on the Stand
Reading Time: 4 minutesA Chinese bribe! A Saudi deal! And other secrets shared in the star witness’ testimony against SBF., Caroline Ellison made some stunning revelations about a Chinese bribe and a possible FTX deal with MBS.
Folks, it’s Wednesday afternoon, and the vibes at the Southern District of New York are nothing less than scandalous. The second day of the much-hyped testimony from former Sam Bankman-Fried partner/direct report/confidante Caroline Ellison is, so far, even more stunning than what she revealed on Tuesday. This round, we’ve ventured beyond the glitz of American finance and Bahamian luxury into the thick of foreign-bribery allegations.
To be very clear, as Judge Lewis A. Kaplan stated outright, Sam Bankman-Fried himself is not facing charges to that effect in this trial; the focus is on his alleged fraud and domestic conspiracies. That being said, Assistant U.S. Attorney Danielle Sassoon thought it, well, pertinent to question Ellison on SBF’s possible foreign entanglements, primarily as a means of 1) spelling out the defendant’s possible motives for the charges being currently tried; and 2) demonstrating Ellison’s viability as a witness, not least through her familiarity with both FTX’s various tendrils of (alleged!) criminal activity and with the coded language by which SBF & Co. discussed such matters.
Some important background: As the prosecution pointed out, various communications between SBF and Caroline Ellison (among others at FTX and Alameda Research) no longer exist, as Bankman-Fried insisted on keeping ‘sensitive’ work communications in encrypted Signal group chats that would disappear after a week. However, the evidence has included Telegram chats, Google Suite interactions, and—most explosively—the sworn word of Caroline Ellison, who was willing to communicate with SBF in ‘coded terms’ that she’s now decoded for us. Here’s what she said Wednesday:
• First up, Ellison told the court that ‘Alameda paid a large bribe to Chinese government officials to get its accounts unlocked.’ This allegation had been previously aired, thanks to a March Department of Justice indictment of SBF that laid it out somewhat hazily. Ellison’s answers offered new details. You see, she says, Alameda had accounts on ‘dozens of exchanges,’ including OKX, an FTX-like crypto business originally headquartered in China. In November 2021, the Chinese government—already in the thick of a wide-scale cryptocurrency crackdown—froze Alameda’s accounts on OKX because it was investigating someone (still unnamed) who’d traded with Alameda. This meant Alameda could not withdraw any money from OKX, and later, it also meant it could no longer engage in OKX trades. This put $1 billion out of reach, which, as Ellison put it, was a ‘substantial amount of Alameda trading capital.’ An FTX-Alameda brain trust that then gathered to workshop solutions to this problem included the usual suspects (SBF, Ellison, Gary Wang, Nishad Singh) as well as FTX Chief Operating Officer Constance Wang, FTX Business Development Manager David Ma, and another employee simply referred to as ‘Handi.’ (Here is a possible X/Twitter account for Handi?) These last three were included, Ellison noted, because they were ‘all Chinese and had connections with China’ and its government. Specifically, Handi’s father was a mainland government official (who was also not identified). The group proposed various strategies, including 1) making several sock-puppet OKX accounts named for Thai prostitutes so that Alameda traders could sidestep the freeze; 2) hiring a lawyer so that the company could negotiate with Chinese officials, which ultimately proved fruitless; and 3) in what Ellison said was Ma’s suggestion, sending at least $100 million of cryptocurrencies, pieced in individual installments, to specific wallet addresses whose owners, it seemed to be presumed, would help solve the issue. In other words: a bribe. SBF initially resisted this tack, according to Ellison, but later came to embrace it. Handi, however, was quite upset about the whole thing, which apparently led Bankman-Fried to yell at her to ‘shut the fuck up,’ as Ellison stated.
• In a January 2022 Signal group chat, a screenshot from which was presented to the jury, SBF, Caroline Ellison, and Alameda co-CEO Sam Trabucco discussed the China/Handi issue, with Bankman-Fried leading off his message with ‘btw, Handi’s being pretty shitty/antagonistic.’ By that time, Ellison said, Handi had already quit Alameda. In a February 2022 chat, Trabucco wrote, ‘did Handi’s father immediately turn us in or something,’ to which SBF responded, ‘lol.’ (Ellison pronounced the message ‘lawl,’ and she was asked to explain to the court what the abbreviation meant.)
• In another document from late 2021, an Alameda balance sheet prepped by Ellison and shared with SBF, a bullet point headed a list of ‘notable/idiosyncratic pnl stuff’—which, the witness explained, referred to factors affecting Alameda’s business. One of the list items read, ‘−150m from the thing?’ ‘The thing,’ Ellison declared, was referring to the alleged Chinese crypto bribe, in an example of the ‘coded terms’ alluded to earlier.
• One more! When you run out of money, whom do you usually turn to? If your answer to that is Saudi Arabian Crown Prince Mohammed bin Salman, well, you and SBF have similar minds. In the fall of 2022, after the summer’s crypto-market downturns had worsened Alameda’s already precarious financial situation, SBF was apparently considering raising further capital by selling FTX equity shares to the, um, controversial Saudi royal. In an Ellison-penned to-do list from that time, which included a leading section on ‘hedging/getting more capital’ for the embattled Alameda, one of the listed options was ‘raising from Saudis,’ which was entirely SBF’s idea, Ellison said. Another Ellison list shown to the jury was an ‘often-updated’ log entitled ‘things Sam is freaking out about.’ What was Sam freaking out about? Well, for one, he was really antsy about hedging Alameda/FTX losses by ‘raising from MBS’ and ‘getting regulators to crack down on Binance.’ This also popped up in another piece of evidence from Oct. 1, 2022, a separate Alameda balance sheet from Ellison that included a note regarding a fundraising ‘plan’—this being to sell a couple billion dollars’ worth of Bitcoin at a point when its price exceeded $20,000, as well as a means by which ‘FTX may raise.’ This, Ellison informed us, was pointedly referring to SBF’s plan to sell off FTX equity shares to potential investors including … Saudi Arabia’s MBS.
More to come!
Reference: https://slate.com/technology/2023/10/caroline-ellison-testimony-sbf-china-bribe-mbs.html
Ref: slate
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