The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sam Bankman-Fried’s ex-girlfriend is using testimony that she fully exposed a Bahamian bank’s alleged involvement in FTX’s collapse as a key element in today’s bid to escape a jail sentence.

Caroline Ellison, whose fate will be determined by a New York judge, has produced a letter from attorneys representing victims of the crypto exchange’s collapse asserting they would never have discovered that Deltec Bank & Trust provided a “secret” credit line worth up to $2bn to FTX without her “valuable assistance”.

Adam Moskowitz and David Boies, who are representing aggrieved former FTX customers in a class action lawsuit against Deltec Bank & Trust and other defendants in the southern Florida district court, alleged in an August 29, 2024, letter that Ms Ellison revealed how the Bahamian institution purportedly “transferred” incoming FTX client deposits to Mr Bankman-Fried’s private trading company without their knowledge.

And they also claimed she exposed how Deltec Bank & Trust “secretly helped” Tether to increase the value of its stablecoin, whose price is supposed to be pegged one:one with the US dollar, by incentivising Mr Bankman-Fried’s same trading firm, Alameda Research, to mint Tether coins that could be “immediately sold” for profit.

FTX’s victims are not the only ones backing Ms Ellison’s call for a lighter sentence. US federal prosecutors, who secured a conviction and 25-year jail term for her former boyfriend, have also backed going easy as “very timely co-operation” enabled them to swiftly indict Mr Bankman-Fried before he had a chance to flee The Bahamas after the crypto exchange’s November 2022 collapse.

Meanwhile Messrs Moskowitz and Boies, pointing out that Ms Ellison has provided 7,000 pages of text messages that “substantiate” their clients’ claims, added that these documents will also help them defeat arguments by Deltec Bank & Trust and others that the south Florida court has no jurisdiction over them.

“Ms Ellison shared with plaintiffs documents and testimony supporting plaintiffs’ allegations that Deltec Bank, an offshore bank located in The Bahamas that serviced FTX and Alameda accounts, individually identified incoming FTX customer deposits and manually transferred those deposits into Alameda’s Deltec bank account daily, though Deltec knew those incoming deposits belonged to FTX customers,” they wrote.

Their letter, submitted as part of Ms Ellison’s bid to avoid jail and be sentenced to “time served with a period of supervised release”, also asserted she provided evidence to show Deltec “secretly helped... Tether to increase the market price and capitalisation of its stablecoin by offering inducements to Alameda to use FTX customer funds to mint [Tether coins], which Alameda could immediately sell at a profit”.

And they also claimed that Mr Bankman-Fried’s ex-girlfriend exposed how the Bahamian bank “extended a secret de facto line of credit to FTX that sometimes exceeded $2bn without which defendant Bankman-Fried could not have perpetuated the FTX fraud.

“Deltec had succeeded in keeping this information from plaintiffs until Ms Ellison shared it with them, and counsel is grateful for Ms Ellison’s co-operation to-date and as plaintiffs’ cases proceed,” Messrs Moskowitz and Boies added.

But Deltec Bank & Trust, in a written response to Tribune Business inquiries, dismissed the alleged evidence provided against it by Ms Ellison. Portraying her as someone willing to do anything in return for not being sued by the class action lawsuit victims, the Bahamian institution asserted that the south Florida court has yet to rule on whether the ‘“evidence” she provided can be admitted in the case.

Reiterating that it will vigorously defend itself and its chairman, Jean Chalopin, over any FTX-related allegations of wrongdoing, Deltec branded the regurgitated claims as “baseless” and said the judge overseeing the class action complaint has yet to allow the crypto exchange’s victims to amend their lawsuit and include what Ms Ellison has supplied.

“These are recitations of the same baseless allegations plaintiffs made months ago, and that have previously been reported on. There have been no substantial developments in the US civil litigation,” Deltec Bank & Trust told this newspaper. 

“The plaintiffs in this matter have made baseless allegations of wrongdoing that rely on irrelevant, editorialised and often completely false assertions. In the absence of facts, the plaintiffs cherry-pick self-serving and out-of-context messages and wholly misconstrue what is, in reality, typical and legitimate banking activity.

 “On February 16 of this year, plaintiffs sought permission to amend their complaint in the putative class action in Florida. The proposed amended complaint relies on the self-serving version of events presented by Ms Ellison, an individual who admittedly participated in a fraud that victimised over a million people,” Deltec Bank & Trust added.

“But now Ms Ellison apparently thinks the public should believe a version of events that she only provided to plaintiffs’ attorneys in exchange for plaintiffs’ promise to dismiss their claims against her. Unsurprisingly, the amended complaint and Ms Ellison’s testimony contain numerous mischaracterisations and unsupported allegations.

“To-date, the court has not even determined whether it will permit the plaintiffs’ proposed further amendments to the complaint. If it does, Deltec Bank and Mr Chalopin will promptly move to dismiss the amended complaint for its various failures.”

Summing up its position, Deltec Bank & Trust added: “In the wake of a highly publicised event such as the collapse of FTX, class action lawsuits instigated by opportunistic class action attorneys are commonplace in the US.

“The filing of a class action lawsuit such as this one – where everyone from celebrities to athletes to banks to law firms have been sued – does not mean that the defendants have engaged in any wrongdoing. We will continue to vigorously defend against these meritless claims and are confident that we will prevail.”

Ms Ellison was a key part of Mr Bankman-Fried’s inner circle, and ran Alameda Research, which played a key role in defrauding FTX customers by misappropriating their assets without their knowledge. US federal prosecutors, though, have praised the “substantial assistance” and “extraordinary co-operation” she gave in enabling them to successfully prosecute her former boyfriend.

Danielle Sassoon, an assistant attorney with the US southern New York district attorney’s office, wrote in a September 17, 2024, letter to Judge Lewis Kaplan: “Ellison’s co-operation was very timely. Although she did not blow the whistle on any misconduct before FTX’s collapse, she came clean prior to FTX’s declaring bankruptcy to her employees on November 9, 2022.

“The timeliness of Ellison’s co-operation contributed to the speed with which the [US] government was able to indict Bankman-Fried, ensuring that he did not flee The Bahamas or further obstruct the government’s investigation..... The information Ellison provided about bribery of Chinese officials was crucial to charging Bankman-Fried with conspiracy to commit Foreign Corrupt Practices Act bribery.

“Without The Bahamas’ consent, the government did not proceed on this count at trial, but Ellison testified about the bribery scheme to help the jury understand how the criminal relationship of trust between Ellison and Bankman-Fried developed, and how Bankman-Fried had a cavalier attitude about the law when it served the needs of his business.”

Ms Ellison, in her sentencing submission, appears anxious to portray herself as a woebegone, hapless soul who was dominated emotionally and psychologically by Mr Bankman-Fried and subject to his every “whim”. She says FTX moved to The Bahamas around the time the two split-up, and that he “pressured” her to move from Hong Kong to Nassau.

“In the Bahamas, Caroline lived on a small island where the only people she knew were employees of FTX or Alameda Research, and the only activities were working and hanging around the development where they all lived in shared apartments that Mr Bankman-Fried had directed the companies to purchase,” Ms Ellison’s sentencing submission alleged.

“Caroline recalls this move pushed her closer to the other people at FTX and Alameda Research, and further cut her off from the rest of the world. Caroline’s living situation in The Bahamas exacerbated the complicated dynamics between her and Mr Bankman-Fried.

“Shortly after arriving in The Bahamas, Caroline asked several colleagues if they wanted to share a house. But soon thereafter Mr Bankman-Fried approached the same people to live with him... Then, Mr Bankman-Fried proposed that he and Caroline resume dating - this time without keeping it secret. Thinking this signalled that Mr Bankman-Fried was committed to a more normal relationship, Caroline agreed.

“Caroline nevertheless recognised quickly that this relationship was still unhealthy. When she told a college friend in December 2021 ‘they had gotten back together’, she commented: ‘Maybe it’s a dumb idea’. Shortly thereafter, Caroline moved into a shared bedroom with Mr Bankman-Fried at the Orchid condo at Albany.”

Ms Ellison also alleged that her ex-boyfriend “excluded” her from “the many glitzy events” he sponsored and attended, adding: “Even at the lavish, multi-day 2022 ‘Crypto Bahamas’ conference, which occurred around the time of their break-up, Mr Bankman-Fried did not invite Caroline to attend the events, dinners and parties he arranged with celebrities and politicians.”