In the spring of 2018, Caroline Ellison, a quiet math nerd and star student at Stanford, was working at the quant-trading firm Jane Street when she was approached by Sam Bankman-Fried, a crypto entrepreneur. Bankman-Fried pitched her on joining Alameda Research, a new digital currency hedge fund he was working on that would exploit differences in pricing for Bitcoin in different countries. Ellison was attracted to the idea of the perfect arbitrage and the opportunity to work with Bankman-Fried, whom she saw as a genius.
Ellison joined Alameda as its CEO and quickly rose through the ranks of the crypto world. However, as the years went on, she found herself increasingly drawn into an ever-widening crypto gyre of deceit and desperation. It was later revealed that Alameda’s speculative investments were allegedly made using FTX customer deposits, taking billions without the users’ knowledge. And it was Alameda that reportedly covered up the scheme, ensuring that the assets it was trading on FTX were kept off its own balance sheet.
In 2021, FTX, once the second largest crypto exchange in the world and closely tied to Alameda, collapsed into a $32 billion pile of risky bets and worthless tokens. FTX estimates that it will have more than one million creditors seeking damages, including the rank and file of FTX who were reportedly convinced to pour their life savings into the platform. The bankruptcy filings also show that Alameda Research handed out three personal loans to FTX executives, including a $1 billion loan to Bankman-Fried.
As the collapse of FTX comes into clearer focus and multiple US agencies announce investigations, Ellison finds herself at the centre of one of the largest alleged frauds of the past decade. And while Ellison’s advice to her younger self to be less risk-averse and believe in herself more may have seemed like good advice at the time, it ultimately proved to be the epitaph for one of the biggest financial catastrophes in recent memory.
