the money game

Sam Bankman-Fried May Regret Throwing Caroline Ellison Under the Bus

Photo: Bloomberg/Bloomberg via Getty Images

Last night, Sam Bankman-Fried cracked. For the last few days, the 30-year-old former decabillionaire has given various interviews from his Bahamian suite. Dressed in his most formal T-shirts, he spoke of regret and contrition to the New York Times and Good Morning America, repeating lines about big mistakes and a tone-deaf joke about how it’s been “a bad month.”

But during a Twitter spaces event on Thursday — a kind of radio call-in show — Kim Dotcom (yes, the Megaupload guy) asked him a question that seemed to make Bankman-Fried lose his cool. It was about Caroline Ellison, the former CEO of Bankman-Fried’s hedge fund, Alameda Research. Ellison, of course, also happens to be Bankman-Fried’s ex-girlfriend. “You had power over her and she did what you asked for,” Dotcom said. “Why would anyone believe anything you say when you’re throwing your own lover under the bus?”

It was here that the carefully constructed image Bankman-Fried had sought to project broke down. See, SBF wants to talk about complicated, wonky financial things — margin requirements and the complex market structure behind his now-bankrupt exchange, FTX. He will admit that he was a little careless, labeled things poorly, should have been more on top of his web of businesses — still, all this was really just a $32 billion misunderstanding. Got it? What he does not want to talk about is what this is actually all about — which is how much power and control he really had over all aspects of the FTX and Alameda. That would seem to include being his ex-girlfriend’s boss. “Look, I fucked up big, but I’m pretty offended by some parts of that,” he said. “Caroline and I had been together for a while. I don’t control her. I never did. I think it’s really fucked that you would say that I would — that that’s how things work.”

But when Bankman-Fried says, “I don’t control her,” what he’s really saying is, It’s Caroline’s fault. This tracks with the implications of various public statements he’s indirectly made about Ellison. It was just minutes earlier in the Twitter event that he said “there was a pretty big diffusion of responsibility.” He told my colleague Jen Weiczner that problems with Alameda “happened over the last year or so. And I haven’t been running Alameda during that year.” (Ellison was appointed co-CEO, along with trader Sam Trabucco, in October, 2021. In August, Trabucco left and she became the sole CEO). To the extent that he’s taking the blame, he appears to be saying that he bears responsibility for appointing someone unfit for the job: “I was frankly surprised by how big Alameda’s position was, which points to another failure of oversight on my part and failure to appoint someone to be chiefly in charge of that,” he told Andrew Ross Sorkin. What doesn’t quite work about Bankman-Fried’s apology tour is his insistence, on the one hand, that this was all a mistake, but then, on the other, that other people were really in control of it all – most notably Caroline Ellison.

But it is also not just Ellison he is trying to blame. Take a look back at his interview with Vox’s Kelsey Piper, where he throws two of his other former top lieutenants under the bus: director of engineering Nishad Singh is “ashamed and guilty,” while chief technology officer Gary Wang is “scared.” He then implied that they had acted unethically. (“It hit him hard,” Bankman-Fried said, referring to Singh while saying nothing about Wang).

And, of course, these people do bear responsibility for the collapse of the company. John J. Ray III, the current CEO of FTX who’s in charge of picking up the pieces here, described them all as “a very small group of inexperienced, unsophisticated, and potentially compromised individuals.” It’s easy to look at Ellison and find her frivolous: She was a LARPer, she was into Harry Potter, she’s not even 30. The truth is surely more complicated. Ellison did play an active role in the management of Alameda — but she’s also talked directly about how Bankman-Fried changed her mind about the usefulness of Serum, a decentralized finance project he co-founded that ultimately made up the hedge fund’s second-largest holding. “Serum was another thing where, when we first started talking about it, I was like, Well, what’s the point?” she said. “It’s partly, probably like, Sam talking a lot about it in the context of Serum and stuff made me realize, Oh, there’s actually a huge amount of potential here.” (The irony about this is that Ellison was actually right in questioning why Alameda would invest in Serum, and it’s since collapsed — undermining its whole decentralized selling point). This makes sense because Bankman-Fried owned about 90 percent of Alameda — meaning that 90 cents out of every dollar in profit went to him. As others have pointed out, this was his money.

I think it’s unlikely that Bankman-Fried is done answering questions about the nature of his relationship with Ellison, whether he wants to or not. Take this in from Ellison’s perspective. Investigators will want to know how she made her decisions. Prosecutors are going to want to talk to her. Ellison hasn’t made any public statements, but it seems fair to guess that she would have every reason in the world to cut a deal with aggressive, motivated investigators who are likely far more interested in bringing Bankman-Fried to justice than her. And prosecutors aren’t going to take Bankman-Fried at his word — especially since he was giving Forbes a detailed look inside his hedge fund as recently as March, and apparently assessing its balance sheet in August, puncturing his excuse that he wasn’t really aware of it all.

Ellison hasn’t been making the media circuit like her former boss and former boyfriend in recent weeks, but her words still loom large in the entire affair. According to The Wall Street Journal, she told employees in a video call that she, Bankman-Fried, Singh, and Wang all knew that FTX’s customer deposits were being used by Alameda — a potentially fraudulent commingling of funds that’s at the very heart of what will happen next to these traders. (He told Bloomberg reporter Zeke Faux that he “doesn’t remember it that way” and downplayed his role in that meeting to a mere “kibitzing.” However, he also acknowledged that it happened, saying “that was the point at which Alameda’s margin position on FTX got, well, it got more leveraged substantially.”) But there was a telling moment in George Stephanopoulos’s interview where the Good Morning America host pressed Bankman-Fried on this. “If she’s in court and you’re in court, and she’s under oath and you’re under oath, and you’re asked, ‘Did you know that these funds were being funneled to Alameda?,’ what is your answer?” Stephanopoulos asked.

Bankman-Fried appears to stare at the floor. Five seconds go by. “I did not know that there was any improper, uhh, use of customer funds,” he said. Clearly Bankman-Fried was not under oath. But one day, he may be, and he may have to answer that very question. I doubt he’ll give the same answer.

Sam Bankman-Fried May Regret His Comment on Caroline Ellison