Caroline Ellison said SBF considered raising money from Saudi crown prince to repay FTX customers
Caroline Ellison, former chief executive officer of Alameda Research LLC, exits court in New York, US, on Tuesday, Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Caroline Ellison, who ran Sam Bankman-Fried’s crypto hedge fund while also dating the FTX founder, told jurors in her second day of testimony that one way her boss was considering repaying FTX customer accounts was by raising money from Saudi Crown Prince Mohammed bin Salman.
Ellison, 28, pleaded guilty in December to multiple counts of fraud as part of a plea deal with the government and is now viewed as the prosecution’s star witness in Bankman-Fried’s trial. In damning testimony on Tuesday, she said Bankman-Fried directed her and other staffers to defraud FTX customers by funneling billions of dollars to sister hedge fund Alameda Research.
Assistant U.S. attorney Danielle Sassoon wasted no time diving back into the questioning when court was called to session at 9:30am.
After previously detailing how FTX customer funds were used to repay Alameda loans, Ellison said on Wednesday that crypto lender Genesis called back a bunch of loans in 2022 and asked to see a balance sheet. Because Alameda’s actual balance sheet showed it had $15 billion in FTX customer funds, Bankman-Fried directed Ellison on June 28, 2022, to come up with “alternative” balance sheets that didn’t look as bad, she said.
Ellison, wearing a buttoned gray blazer with her long hair swept over her left shoulder, said she discussed her concerns with Bankman-Fried as well as top execs Gary Wang and Nishad Singh. She said the group brainstormed ways to make the balance sheet look better.
Assistant U.S. Attorney Danielle Sassoon questions Caroline Ellison as defense lawyer Mark Cohen stands to object at Sam Bankman-Fried’s fraud trial before U.S. District Judge Lewis Kaplan over the collapse of FTX, the bankrupt cryptocurrency exchange, at Federal Court in New York City, U.S., October 11, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
After the meeting, Ellison prepared a number of different balance sheet variations to send to Genesis. Eventually, according to Ellison, Bankman-Fried chose the one that omitted a line saying “FTX borrows,” hiding $10 billion in borrowed customer money. “Some was netted against related-party loans,” she said, and “some netted against crypto.”
That made it seem “like we had plenty of assets to cover our open term loans,” Ellison said.
Ellison told jurors she “was in a constant state of dread” since she knew there were billions of dollars of loans being recalled that could only be repaid with money from FTX customers. She said she was “worried about the possibility of customer withdrawals” that could happen at any time.
“I was concerned that if anyone found out, it would all come crashing down,” Ellison said. When asked by Sassoon why she continued with the scheme, Ellison said, “Sam told me to.”
By October 2022, the internal balance sheet had liabilities of $15.6 billion, while the numbers they showed the lender indicated just under $8 billion. Ellison said Bankman-Fried was talking about trying to raise money from Mohammed bin Salman, also known as MBS, as a way to make FTX customers whole.
Disappearing Signal messages
Ellison, a Stanford graduate and one of Bankman-Fried’s earliest recruits to Alameda in 2017, was reportedly convinced by Bankman-Fried to ditch her job at Wall Street trading firm Jane Street to join Alameda as a trader. At the time, the hedge fund was still in its original office in the San Francisco Bay area.
Six years later, Ellison is testifying against the 31-year-old Bankman-Fried, who faces seven federal charges, including wire fraud, securities fraud and money laundering, all tied to the collapse of FTX and Alameda late last year. If convicted in the trial that began last week, Bankman-Fried could spend his life in prison. He has pleaded not guilty.
Ellison said Bankman-Fried directed FTX and Alameda employees to use the disappearing message setting on Signal and told them to be very careful about what they put in writing because of potential legal exposure. In addition to a companywide meeting about the Signal policy, Bankman-Fried also told employees that when it comes to Slack, they should only write things that they’re comfortable seeing on the front page of the New York Times.
Caroline Ellison, former CEO of Alameda Research, center, arrives at court in New York on Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Backing up to the summer and fall of 2022, Ellison provided more detail about her interactions with Bankman-Fried as his crypto firms’ financial problems were becoming more apparent. Ellison said the two ways they talked about bringing in more money for FTX were by acquiring BlockFi or by selling equity.
In August of last year, Ellison said Bankman-Fried told her that Alameda’s finances were her fault even though she’d been warning about FTX’s expanding portfolio of venture investments and the need to repay FTX customer accounts. Bankman-Fried told her she should have hedged and, “speaking loudly and strongly,” said it was “her fault.”
On the stand, Ellison took some blame, admitting she should have done things differently, “but Sam was the one who chose to make all the investments that put us in a leveraged position,” she said.
Ellison, who’d started dating Bankman-Fried in the summer of 2021, said that by the fall of 2022 they’d been broken up for several months. She said she would try to avoid one-on-one contact with Bankman-Fried, though they were still talking on Signal and were together in group meetings. She said she still provided him the same regular updates on Alameda and its balance sheet.
Ellison said she kept a Google Doc that had a subcategory labeled, “things Sam is freaking out about.” It included, “raising from MBS,” as well as “getting regulators to crack down on Binance,” a rival exchange that was also an early investor in FTX. Bankman-Fried wanted to see Binance feel some pain because he saw that as the best way for FTX to increase market share, Ellison said.
Another worry on the list was, “bad pr in the next six months,” which Bankman-Fried feared would interfere with FTX’s efforts to obtain a license for futures trading in the U.S.
WATCH: Ellison says “Sam directed me to commit these crimes”
Technology
CoreWeave CEO responds to data center delays as stock plunges. Core Scientific shares fall
CoreWeave shares sank 13% on Tuesday after CEO Mike Intrator addressed delays at a third-party data center developer that hit full-year guidance in its latest earnings report.
“Quite frankly, every single part of this quarter went exactly as we planned, except for one delay at a singular data center,” Intrator told CNBC’s “Squawk on the Street” on Tuesday.
He then clarified that a “singular data center provider” is more accurate.
“Some people might think it’s one complex, but when I go over the numbers, we’re talking about multiple places,” CNBC’s Jim Cramer said. “And it just so happens that the places are all connected to an outfit called Core Scientific that you tried to buy.”
Cramer noted delays at complexes in Texas, Oklahoma and North Carolina.
Intrator said the companies have been working together on infrastructure for a long time a would continue work to bring it online. He did not directly confirm that Core Scientific is the third-party provider.
CoreWeave tried to acquire Core Scientific for $9 billion earlier this year. Core Scientific shareholders voted against the proposed deal. Core Scientific shares sank 7% Tuesday.
During CoreWeave’s quarterly earnings call on Monday, JPMorgan Securities analyst Mark Murphy asked if the delay was related to Core Scientific, but Intrator declined to name the company. At another point in the call, the CEO suggested that just one data center, not multiple sites, were affected.
“There was a problem at one data center that’s impacting us, but there are 41 data centers in our portfolio,” Intrator said.
At a different point in the call, CoreWeave’s CFO Nitin Agrawal said the delays stem from “a single provider, data center provider partner.”
When reached for comment about how many sites were affected, CoreWeave did not provide a number and pointed to Intrator’s statements on the earnings call and during his “Squawk on the Street” interview.
CoreWeave, which provides infrastructure for artificial intelligence companies, reported third-quarter results on Monday that showed $1.36 billion in revenue for the period, up 134% from $583.9 million a year ago. But CoreWeave now sees 2025 revenue coming in between $5.05 billion and $5.15 billion, below the average analyst estimate of $5.29 billion.
Intrator told CNBC on Tuesday that CoreWeave has teams of employees working with contractors and Core Scientific at those sites “every single day” to get things back on track.
“It became apparent to us in Q3 that there were delays at the facility,” Intrator said. “CoreWeave responded by deploying our own boots on the ground to ensure that everything was being done in order to move those facilities along as quickly as possible.”
Intrator told analysts on Monday that the delays would not affect its backlog or get the full value from contracts.
Core Scientific did not immediately respond to a request for comment.
CoreWeave has been on a deal-making blitz as big tech companies and AI startups race to build out their computing infrastructure.
The company announced in September that it agreed to provide Meta with $14.2 billion of AI cloud infrastructure, just days after expanding its contract with OpenAI to $22.4 billion.
Cheng Xin | Getty Images
Rocket Lab‘s stock rose as much as 3% on Tuesday after the space company posted record revenues in the third-quarter as it scoops up more launch deals and builds its backlog.
The company, which makes satellites and rockets and provides launch services to its customers, on Monday reported revenue of $155 million for the period. That surpassed the $152 million forecast from analysts polled by LSEG, and it was up 48% from about $105 million a year ago. Rocket Lab also posted a smaller-than-expected loss of 3 cents per share, versus the 10-cent per share loss anticipated.
Additionally, Rocket Lab issued strong guidance for the current quarter, saying it expects revenues between $170 million and $180 million. Analysts had forecast $172 million in revenues.
Rocket Lab said it’s experiencing a record backlog, with 49 rocket launches on contract. The company said it signed 17 of those deals during the third quarter and plans to close out the year with over 20 launches.
In an earnings release, CEO Peter Beck said the Long Beach, California, company is “just days away” from reaching a new annual launch record. Rocket Lab is also tackling mergers and acquisitions that target key defense initiatives such as President Donald Trump’s missile defense system plan known as the ‘Golden Dome,” Beck added.
Competition is intensifying in the space technology sector as the U.S. government and NASA lean on more independent contractors, including Elon Musk‘s SpaceX, to power missions to return to the moon. Growing excitement has also brought a wave of space companies to the public markets this year, including Texas-based Firefly Aerospace.
Last month, Rocket Lab’s stock jumped more than 31% after announcing a slew of new launch deals. Shares have more than doubled this year and surged nearly 270% over the last twelve months. The stock has pulled back about 13% in November amid a broader market selloff.
During the third quarter, the company closed its acquisition of satellite sensor maker Geost and opened a new launch site for its Neutron rocket.
Rocket Lab reported an adjusted EBITDA loss of $26.3 million, topping the $21 million to $23 million loss range previously forecast. Analysts anticipated a $22.2 million adjusted EBITDA loss, according to FactSet.
The company expects adjusted EBITDA losses to range between $23 million and $29 million in the fourth quarter, surpassing the $13 million loss forecast by FactSet.
WATCH: Rocket Lab CEO talks competing for Space Force contracts
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