Eduardo Munoz Alvarez
- Caroline Ellison testified that Sam Bankman-Fried paid millions in bribes to Chinese officials.
- Ellison said the bribes were paid in late 2021 to unlock two trading accounts.
- Alameda had accounts on two different China-based cryptocurrency exchanges, she said.
Caroline Ellison testified at Sam Bankman-Fried's criminal trial Wednesday that she believed the disgraced crypto mogul paid "in the ballpark of $100 million" in bribes to Chinese government officials.
The apparent bribes were paid, Ellison said, in late 2021 in an effort to unlock two cryptocurrency trading accounts owned by Alameda Research. Bankman-Fried owned the cryptocurrency hedge fund, and Ellison became a CEO of the company in mid-2021.
Ellison talked about the episode on the witness stand in a downtown Manhattan federal courtroom as part of a larger discussion, guided by Assistant US Attorney Danielle Sassoon, about how Bankman-Fried discouraged employees to put things in writing, and whether Ellison and Bankman-Fried "often spoke in coded terms about potential criminal activity."
"Yes. When Alameda paid what I believe was a large bribe to Chinese government officials to get our accounts unlocked," Ellison said.
In early 2021, Alameda had accounts on two different China-based cryptocurrency exchanges, which together held about $1 billion in assets, Ellison testified.
According to Ellison, Chinese regulators froze the funds early that year as part of a money laundering investigation into a person who had traded with Alameda.
Bankman-Fried and his inner circle tried different ways to get the funds unlocked. At first, they hired a lawyer in China to negotiate with government officials to unfreeze the account. After months of trying, the efforts went nowhere, Ellison said.
Then they entertained a proposal from Alameda Research employee David Ma, which Ellison said she understood to be simply bribing key government officials, she testified.
Ma's proposal was controversial within the Alameda Research office, Ellison said, and the idea was tabled.
Another method, Ellison said, was to hire "Thai prostitutes" and use their accounts to arrange trades with Alameda Research that were intentionally bad for the crypto hedge fund, thereby transferring value away from Alameda's accounts and to the sex workers, Ellison said.
Then, Ellison said, Alameda would reclaim the assets from the Thai sex workers through non-frozen accounts.
The strategy didn't work, Ellison testified.
After a year of failed efforts, Bankman-Fried said he would do things Ma's way, Ellison testified.
Ma supplied several cryptocurrency addresses, which Bankman-Fried directed Ellison to send money to, she said on the witness stand.
"He said he found a way to get our accounts unfrozen and all we had to do is send crypto to these addresses," she said.
Neither Ma nor a representative could immediately be reached for comment. Along with Bankman-Fried, Ma is a defendant in a civil lawsuit in California related to insurance claims over the collapse of FTX, but he does not have a lawyer listed on the court docket.
"My impression is that they were unfrozen by paying a bribe," Ellison testified Wednesday.
Prosecutors allege that Bankman-Fried defrauded investors and lenders of Alameda, as well as customers of his cryptocurrency exchange FTX, by commingling FTX customer funds with Alameda investments.
Ellison has pleaded guilty to her own criminal charges related to the scheme and is testifying for the second day on the witness stand as part of a cooperation agreement.
Some of the alleged bribes appear to have been referenced in an earlier indictment against Bankman-Fried, but were not included in the set of charges that have gone to trial.
US District Judge Lewis Kaplan struck several parts of Ellison's testimony about the alleged bribe from the court record Wednesday, siding with arguments from Bankman-Fried's lawyers that they weren't directly related to the charges against him, and that she was using inferences about what happened instead of citing hard facts.
After a lengthy sidebar in the middle of Ellison's testimony, Kaplan explained to jurors that Bankman-Fried wasn't facing any criminal charges related to any alleged bribes to foreign government officials. He said Ellison's testimony should only be considered to illustrate the level of trust between Bankman-Fried and Ellison, and his potential motive.
Ellison alluded to the payments in a document prosecutors pulled up as a court exhibit. In it, Ellison listed "$150 million for the thing" among other big events for Alameda Research in 2021.
Ellison said she referred to the potential bribes as "the thing" because "it might leak and be used against us in a court case."
"I didn't want to put in writing that we paid bribes to get our accounts unlocked," she testified.