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The story of how Caroline Ellison became involved in FTX’s collapse

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Early in November, Alameda Research employees connected to a video chat to learn what would become of the trading company, which was on the verge of failure.

Caroline Ellison was in charge of breaking the dreadful news. The hub of Sam Bankman-failing Fried’s FTX business was Alameda. The 28-year-old Ms. Ellison was in the middle of Alameda. They were all experiencing a crisis.

Mr. Bankman-Fried, a friend of Ms. Ellison’s, founded both Alameda and the cryptocurrency exchange FTX, and he had chosen her to assist in leading Alameda the year before. Together, they rode the cryptocurrency wave for a while; eventually, FTX achieved a record-breaking worth of $32 billion. It all fell apart this month in a couple of days.

Customers withdrew their money from FTX in a brief, frenetic period out of concern for the companies’ financial stability. The companies struggled to survive, but soon after Ms. Ellison’s chat with employees, they declared bankruptcy. Mr. Bankman-Fried left his position as CEO of FTX.

Investigators from the government, including the new CEO of FTX, are looking into what transpired. The likelihood that customers will ever see their money again is dwindling. Lawsuits were followed by the departure of numerous senior employees. In addition to Gary Wang and Nishad Singh, Ms. Ellison was also let go. They were also Mr. Bankman-top Fried’s assistants.

While Ms. Ellison remained in the engine room, Mr. Bankman-Fried grabbed the spotlight prior to the crash, pushing cryptocurrency and advocating for its interests in Washington. The main objective of Mr. Bankman-Fried’s company Alameda, which was owned nearly wholly by him, was to make money. It was Ms. Ellison’s responsibility to keep it going.

A junior at the helm

Ms. Ellison has described her sudden rise to fame as virtually accidental in a few podcasts and other public appearances. After graduating from Stanford University in 2016, she immediately began working for Wall Street, though the decision was less a response to a calling than it was a response to the question she had been asking herself throughout college: What are math majors meant to do with their lives, anyway?

She first encountered Mr. Bankman-Fried, a trader in his 20s, at Jane Street Capital, a quant trading powerhouse. He had grown up with two professors, just like her. He shared her enthusiasm for the concept of “effective altruism,” which advocates making a lot of money to donate.

Ms. Ellison quickly followed after Mr. Bankman-Fried left to launch Alameda in what she described as “a blind leap into the unknown.” She said in an FTX podcast in 2020 that she was only just out of college but that she was also one of the more seasoned traders there.

Born and raised in the Boston suburbs, Caroline Ellison is the daughter of two MIT economists. She claimed in the podcast that at age 5, she read the second “Harry Potter” book aloud to herself. According to Forbes, she wrote a price study of plush animals at the age of 8. Because his daughters were bored with basic studies, her father developed textbooks on advanced mathematics.

She was a member of the board of what they named the Future Fund, which sought to give grants to nonprofit organizations and invest in “socially impactful firms.” The other members of the board were Messrs. Bankman-Fried, Wang, and Singh. The effective altruism worldview, according to its detractors, might promote excessive risk-taking because one can always make the case that bigger rewards result in larger donations.

According to a document filed in bankruptcy court by the new CEO, Messrs. Bankman-Fried, Wang, and Singh all have ownership interests in at least part of the FTX businesses.

It was previously revealed that Ms. Ellison and Mr. Bankman-Fried occasionally engaged in intimate relationships.

Ms. Ellison was astonished to find that Alameda made even bustling Jane Street seem languid when she first arrived. She said in the FTX podcast, “It was like, wow, the process for doing things is just someone offers something and then someone codes it up and distributes it. After an hour, it has already happened.”

Every object in Mr. Bankman-orbit Fried’s appeared to be moving at the same lightning-fast rate. In just a few short years, he built FTX, an Alameda sister company, into one of the largest cryptocurrency exchanges in the world. Mr. Bankman-Fried served as the CEO of both businesses for a while.

It has been subsequently revealed that his elite echelon frequently used stimulants.

Nothing, according to Ms. Ellison’s tweet from the previous year, “makes you understand how idiotic a lot of normal, non-medicated human experience is,” she said.

Both Alameda and FTX had personnel in the Bahamas and Hong Kong. A individual with knowledge of the situation claims that Ms. Ellison recently spent a significant amount of time working from the Bahamas, similar to Mr. Bankman-Fried.

Ever riskier trading

Arbitrage, which involves purchasing a coin in one place and selling it for more somewhere else, was one of Alameda’s trading techniques. Meanwhile, FTX had become a vital platform for both large and small investors to buy and sell cryptocurrency. Alameda, a significant participant in the cryptocurrency market, commonly traded on the FTX platform.

Alameda started “yield farming” about 2020 by making investments in tokens that offer benefits similar to interest rates. Ms. Ellison at first resisted. She recalled an argument over whether the company should participate in an FTX podcast at the beginning of 2021 and expressed her worries about the danger. In the podcast, she said, “I lost that fight.”

According to tweets from Sam Trabucco, then another rising star at Alameda, in 2021, the firm’s aggressive trading tactics gradually become more reliant on instinct and signs like Elon Musk’s social media posts.


When cryptocurrency prices reached an all-time high in the fall of 2021, FTX was rejoicing over its recent agreement to name the football stadium at the University of California, Berkeley. In order to concentrate on FTX, Mr. Bankman-Fried designated Mr. Trabucco and Ms. Ellison as co-CEOs to operate Alameda. According to a press release issued at the time by Alameda, they took over a 25-person enterprise.

Alameda was still Mr. Bankman-company Fried’s even though he was no longer its CEO. He held 90% of the trading company, according to the bankruptcy papers filed by FTX. 10% belonged to Mr. Wang.

A hero has risen

Digital currencies were in a wild slide by the beginning of 2022. Numerous of the top lending and investment companies in the sector started to sag and eventually gave up. As panic surged across the cryptocurrency community, Mr. Bankman-Fried tried to project himself as a hero by purchasing some struggling businesses and giving credit to others in an effort to calm the market.

Alameda, though, was not immune to the shakeout behind the scenes. Margin calls were also being made to the renowned trading business of Mr. Bankman-Fried.

Earlier this year, in August, Mr. Trabucco announced his resignation as co-CEO. He described his time at Alameda as “tough, draining, and consuming” in a lengthy Twitter thread.

Early November saw the troubles of Mr. Bankman-firms Fried’s come to light in the spotlight he so frequently courted. Concerns regarding Alameda and FTX’s financial situation were expressed in a CoinDesk story. Head of the competing exchange Binance Changpeng Zhao stated that his company would sell its stakes in FTT as a risk-management measure. (FTT was FTX’s digital token.)

Ms. Ellison made an effort to quell the flames while Mr. Zhao and Mr. Bankman-Fried argued on Twitter. She tweeted, mentioning Mr. Zhao, “If you’re wanting to minimize the market impact on your FTT sales, Alameda would happily purchase it all from you now at $22!” FTT had recently traded around $22.15, according to data from CoinDesk.

Mr. Bankman-Fried responded to the question on Twitter regarding Ms. Ellison’s motivation by saying, “I mean, that’s up to her to answer, but they stated they were worried about impact, which this would solve for them, and this is just quicker and easier.” Her communication with Binance regarding the offer was unsuccessful.

In the end, Alameda and FTX’s close relationship proved to be their downfall. According to prior research, FTX used customer funds to lend billions of dollars to Alameda for hazardous trading and investments. Regulators mandate that brokerages separate customer cash from any capital they use for trading in conventional finance.

From heroes to zeroes

In the late-night Hong Kong time video meeting in early November, Ms. Ellison informed the staff that FTX had utilized customer funds to assist Alameda in covering its debts. She expressed regret for disappointing the staff and apologized.

Ms. Ellison further disclosed to staff that she, Messrs. Bankman-Fried, Singh, and Wang were informed of the choice to send client funds to Alameda at the time the companies’ financial issues had become public knowledge but the companies hadn’t yet filed for bankruptcy.

The following day, a lot of Alameda workers quit.


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