Behind FTX's Collapse: How One Executive's Testimony Exposes the Fraud Scheme

Caroline Ellison, the former head of Alameda Research and ex-partner of FTX founder Sam Bankman-Fried, took the witness stand today to deliver damning testimony that places SBF at the center of the exchange’s elaborate fraud. Her account paints a picture of systematic deception orchestrated from the top.

The Architecture of Deception

According to Ellison’s courtroom statements, SBF personally designed the mechanisms that enabled Alameda to siphon billions from FTX customer funds. Rather than acting as a rogue actor, Ellison portrayed herself as following directives from above. She detailed how SBF instructed her to execute trades that would ultimately misappropriate billions in client assets and redirect them into Alameda’s investment activities.

The conspiracy, she testified, extended beyond just SBF. Former chief technology officer Gary Wang, who has already entered a guilty plea, was part of the inner circle executing these fraudulent schemes alongside Ellison.

Personal Ties and Professional Crimes

Ellison and SBF’s relationship dated back to their time at Wall Street trading firm Jane Street, where the two met and later began dating. The personal connection apparently provided cover for what would become one of crypto’s biggest financial disasters. Despite her romantic involvement, Ellison claims she was merely following orders when she participated in the conspiracy to defraud FTX’s user base.

The $14 Billion Question

The scale of Alameda’s debt tells its own story. Ellison testified that approximately $14 billion was needed to satisfy lenders and creditors—a staggering sum that underscores just how much customer capital had been misappropriated and funneled into risky investments.

Why FTX Couldn’t Pay Users Back

When FTX collapsed in November, the exchange found itself unable to honor customer withdrawals. Ellison’s testimony reveals the primary reason: the funds that should have been available to return to users had already been siphoned away to cover Alameda’s massive debts to lenders. In essence, the money was gone—transferred out of FTX through the very system that SBF allegedly engineered.

This courtroom revelation underscores how FTX’s insolvency wasn’t a product of market conditions or technical failure, but rather a calculated operation designed to extract customer capital for Alameda’s use.