A closer look at Sam Bankman-Fried’s Alameda Research and twentysomething CEO Caroline Ellison (2024)

The close ties betweencrypto exchange FTXand its affiliated trading firm, Alameda Research, were well known throughout the industry, investors and industry executives have told Fortune.

Alameda was a quantitative trading firm founded by Sam Bankman-Fried in 2017. The company, known for aggressive trading strategies, offered crypto trading in every market and was led by CEO Caroline Ellison. In 2019, FTX spun out of Alameda and was backed by some of the biggest names in the venture world, including Tiger Global, SoftBank, and Sequoia Capital. The exchange was valued at $32 billion in January, which is notable since venture funding rounds at that time had started to decline. FTX had about 1 million users and employed roughly 300 people, including U.S. and international, a spokesman said Thursday.

Bankman-Fried, who owned a majority of FTX and Alameda, was a media star for much of 2022, appearing often on CNBC and Bloomberg, as well as on the cover ofFortune.The 30-year-old billionaire also became known as crypto’s lender of last resort, bailing out BlockFi and lending money to Voyager Digital.

Who is Caroline Ellison?

But by comparison, not much is known about Caroline Ellison, who hails from Boston, is the twentysomething daughter of economists, and graduated from Stanford University in 2016 with a degree in mathematics. Ellison,in a podcast recorded while she was a trader at Alameda (she became CEO in July 2021), spoke of her childhood love of Harry Potter. (She could not be reached for comment on this story.)

Her lack of experience was evident. Ellison said she didn’t set out to become a trader and didn’t know what to do with her life: “What do math majors do? I guess I’ll apply to some internships with some trading firms, see how that is.” In September 2016 she landed a job at Jane Street, a quant trading firm where Bankman-Fried also had worked, after she completed two internships. Less than two years later, Ellison joined Alamedain March 2018 after meeting with Bankman-Fried, who had just launched the firm. “I decided it was too cool of an opportunity to pass up,” she said at the time.

Ellison went from trading equities at Jane Street to crypto at Alameda, according to the two-year-old podcast. Her year and a half of trading experience actually was more than many Alameda peers, but she also admitted that it took “a lot of adjustments” with the “most obvious big thing is that the equity markets are way more efficient than crypto markets.” Her new role required Ellison to keep capital on 20 different exchanges, in different wallets, and she said she was worried about “the probability that my money was going to get stolen.” Ellison was used to making decisions that were circumscribed, but after joining a small startup with a few people, she realized that a “bunch of decisions have to be made and someone has to make all of them, a lot of them are really uncertain.”

“Everyone in crypto knew”

Earlier this year, rumors began circulating of Alameda’s insolvency after Terra’s LUNA, an algorithmic stablecoin; the crypto bank Celsius; and Three Arrows Capital, the hedge fund, each failed, said Cory Klippsten, founder and CEO of Swan Bitcoin, a financial services company. Klippsten is not an investor in FTX or Alameda but has posted several tweets critical of Bankman-Fried and FTX since March.

FTX extended loans to Alameda using money that customers had deposited on the exchange for trading, the Wall Street JournalreportedThursday. Alameda currently owes FTX about $10 billion, which is more than half of FTX’s $16 billion in customer assets, the story said. Ellison, in a video meeting with FTX employees last week, said that she, Bankman-Fried, and two other FTX executives were aware of the decision to send customer funds to Alameda, the WSJ said. FTX declined to comment.

“There was no Chinese wall between FTX and Alameda,” said Klippsten, who saw the balance sheet that showed Alameda had more than $5.82 billion worth of FTT tokens, which was 40% of its total assets. The $5.82 billion included $3.66 billion that was “locked,” or completely illiquid, Klippsten explained. “These FTT tokens, which were created by FTX out of thin air, are extremely illiquid, and inherently worthless.”

CoinDesk’s reporting on the balance sheetcaused a bank run. FTX began imploding early last week after seeing customer withdrawals of about $5 billion. But FTX had liquidity to fund only 80% of that at 1.7 times leverage,Bankman-Fried said in a tweet. On Wednesday, rival Binancepulled outof plans to buy FTX.Two days later, FTX, Alameda Research, and about 130 affiliated companies filed for Chapter 11 bankruptcy protection in Delaware on Friday. Bankman-Fried resigned as CEO, while Ellison also appears to be out of a job.

It’s not immediately clear which of the portfolio companies are included in the bankruptcy. FTX and FTX US, the VC armFTX Ventures, and Alamedahave mademore than 200 investments,Fortunereported. Alameda made 184 deals, including investments in Solana and Stocktwits, while FTX Ventures’ 48 transactions include SkyBridge Capital and Dave. FTX has 21 investments, including Circle and Liquid Global.

“Everyone in crypto knew [FTX and Alameda] were married at the hip. Anyone could see that,” an FTX investor who requested anonymity told Fortune.

“FTX/Alameda”

One private equity executive, who declined to invest in FTX because its valuation didn’t make sense, noted that payment for order flow, or PFOF, is typically not used by crypto trading firms. This is different from equities where online brokers like Robinhood Markets aggregate trades from their partners and channel them to market makers like Citadel Securities, Susquehanna International Group, and Wolverine Holdings, and collect a fee,according to a Nov. 3 10-Q regulatory filing. The process allows online brokers to offer consumers “free” trading but sometimes at the “cost” of not getting the best price.Regulators like the Securities and Exchange Commission havescrutinizedthe use of PFOF by online brokers because of potential conflicts of interests.

But firms trading in crypto generally don’t use PFOF.“It’s a spread or a commission business,” notesDan Dolev, a senior analyst in fintech equity researchat Mizuho Securities USA. For example, rather than PFOF, Kraken chargesfees on client trades that arecalculated as a percentage of the trade’s quote currency volume, a spokeswoman said. Coinbase also doesn’t use PFOF but charges commissions on trading. But Robinhood champions the use of PFOF in crypto, claiming that sending orders to trading venuesprovidescompetitive prices.

Alameda acted as a market maker, and with no PFOF,it possibly had preferred access to FTX trades or other preferential access to FTX, the private equity executive told Fortune.This could have included better visibility into what clients were doing. “Without PFOF in the [crypto] industry, one wonders about the market maker relationship with exchanges, and people always wondered about the FTX/Alameda relationship especially since they were jointly owned by Sam,” the exec said. Could Alameda have seen orders piling up on FTX to sell a coin, which allowed it to take that information and front run the trades? “It’s definitely possible that they would’ve had advantaged access to see what was happening,” the exec said. (No one at Alameda could be reached for comment, and the website has been taken offline.)

Interestingly, at least in hindsight, that relationship was one of the reasons some investors said they thought FTX was unlikely to stumble. “They had one of the greatest backstops—a super-profitable crypto exchange connected to the No. 1 trade maker in crypto,” the investor said. With the implosion of FTX, this investor’s stake, once valued in the millions, was wiped out.

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A closer look at Sam Bankman-Fried’s Alameda Research and twentysomething CEO Caroline Ellison (2024)

FAQs

What did the Alameda Research do? ›

Activities and donations. As a quantitative trading firm specializing in cryptocurrencies, Alameda's strategies included arbitrage, market making, yield farming, and trading volatility.

What did Caroline Ellison testify? ›

She testified that the crimes she committed with Bankman-Fried included “fraud, conspiracy to commit fraud and money laundering” and that they defrauded FTX customers and investors, as well as Alameda's lenders. “And just to be clear, did you commit these crimes alone?” Sassoon asked. Ellison replied: “No.

What happened to Caroline Ellison? ›

In 2022, she pleaded guilty to fraud, money laundering, and conspiracy charges related to her role at Alameda Research.

How much money did Caroline Ellison make? ›

Ellison was, by most measures, handsomely compensated during her time working for Bankman-Fried, whom she also dated on and off. She had a base salary of $200,000 in addition to large bonuses, including a $20 million haul in 2021, half of which she said she invested in a startup.

What went wrong with Alameda Research? ›

A final–and perhaps substantial–contributor to Alameda's losses: Bankman-Fried's companies had terrible record-keeping and accounting systems. FTX customer deposits were not tracked, according to a bankruptcy filing, leaving it unclear in the bankruptcy proceedings what's owed to customers.

How did Alameda Research lose so much money? ›

The leading theories on why Alameda lost so much range from big bets gone wrong to having godawful accounting records. Those theories might explain why Alameda lost money in 2022 when crypto was crashing, but its losses through 2021 remain a big mystery.

What is SBF's IQ? ›

Saying that SBF is "average", if that means 100 IQ, is ludicrous, but SBF is merely very bright, not a genius. 130 a long way from 'pretty thick'.

Who is the girl in the FTX crypto? ›

Caroline Ellison, the former girlfriend of Sam Bankman-Fried and a top executive in his cryptocurrency business empire, has long loomed as the U.S. government's star witness in the ongoing trial of the disgraced founder of FTX.

Did Bankman-Fried's former girlfriend testify that her crimes were committed with Sam? ›

They were committed with Sam,” she said. Asked about the role Bankman-Fried played in the criminal activity, she said he was the one who “set up the systems that allowed Alameda” to siphon money from FTX customer accounts.

How long will Ellison go to jail? ›

Caroline Ellison entered guilty pleas to cooperate with authorities. Disgraced FTX founder faces up to 50 years in prison at sentencing. Sam Bankman-Fried was found guilty, with his ex-girlfriend testifying against him. Ellison is likely to receive minimal or no prison time for her testimony.

Does FTX still exist? ›

FTX collapsed in early November 2022 after journalists reported an affiliated trading firm, Alameda Research, derived most of its value from speculative cryptocurrency tokens.

What happened to Gary Wang in FTX? ›

On December 18, 2022, Wang pleaded guilty in a plea bargain in the Southern District of New York to wire fraud and three counts of conspiracy involving wire, securities and commodities fraud relating to helping Bankman-Fried defraud FTX customers, for which SBF was later sentenced to 25 years in prison.

Who is the woman with glasses in FTX? ›

Caroline Ellison was the prosecution's star witness in its case against FTX founder Sam Bankman-Fried, who was sentenced on Thursday to 25 years in prison. Ellison, who ran FTX's sister hedge fund Alameda Research, pleaded guilty in December 2022 and has yet to face sentencing.

How much is Larry Ellison worth today? ›

Why is Larry Ellison so rich? ›

Ellison's wealth jumped $14 billion after record earnings from Oracle. Oracle's cloud applications business saw its shares spike by 13% in June 2024 after the company posted strong annual earnings due to demand for generative AI, Fortune reported.

What did the Alameda study find? ›

Signifi- cant findings during periodic assessments of the original 1965 cohort yielded strong support for a link between lifestyle habits and long-term health outcomes. Additionally, social networks, religiosity, and several demographic variables were found to be associated with chronic disease development.

What projects does Alameda Research back? ›

Top Projects by ROI
  • Solana688.0x. $172.
  • Polygon274.0x. $0.7135.
  • Aave88.4x. $88.38.
  • Jito73.3x. $4.52.
  • FTX40.7x. $1.63.
  • Render40.4x. $10.11.
  • Maple27.6x. $13.79.
  • Fantom25.3x. $0.8871.

Why is the Alameda County study important? ›

The Alameda study focused attention on the importance of everyday practices for the maintenance of good health and, ultimately, for longer life.

Was Alameda Research ever profitable? ›

As Lewis relates, Bankman-Fried grew Alameda Research from a small group of effective altruists to a firm generating upwards of a billion dollars in annual profit by 2020. Alameda's beginning wasn't seamless, however.

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