Who is Caroline Ellison and how did she end up at the center of FTX’s collapse?

The collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange has led to increased attention on the role played by Alameda Research and its CEO Caroline Ellison in the company’s implosion.

Ellison, 28, was raised by two MIT economists and holds a mathematics degree from Stanford. He met Bankman-Fried at the Jane Street Capital trading firm. Bankman-Fried, like Ellison, was raised by professors, and the couple embraced the philosophy of “effective altruism,” which involves earning large sums of money to fund philanthropic endeavors that benefit society to the greatest extent possible. The two were allegedly involved in a casual relationship, according to CoinDesk.

Caroline Ellison, CEO of Alameda Research, via Twitter (Twitter @carolinecapital)

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When Bankman-Fried left Jane Street in 2017 to set up his own hedge fund known as Alameda Research, Ellison joined him soon after in what she called “a blind leap into the unknown.” She became a lead trader at the new firm and said in an FTX-related podcast that joining Alameda was “too good an opportunity to pass up,” but dealing with capital was “a little daunting” when he started working for the company. in 2018.

“Mostly, in a way, it was something I wasn’t used to thinking about,” she said. “So it’s been sort of – I don’t know, I guess I’ve been as a trader for, I mean, not that long on Jane Street but a year and a half, which has been sort of trading experience more than a lot of Alameda traders had at the time. I kind of wanted to go in and be like an expert on everything, but there was still a lot of things in the cryptocurrency world that I didn’t know about.”

FTX logo

The logo of FTX is seen at the entrance to the FTX Arena in Miami, Florida November 12, 2022. (Reuters/Marco Bello/Photo Reuters)

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Alameda was a leading trader in the cryptocurrency industry and traded frequently on FTX’s platform, according to the Wall Street Journal. Although Bankman-Fried was the founder and majority owner of Alameda, he eventually relinquished control of its operations and focused primarily on his role as CEO of cryptocurrency exchange FTX, which he founded in 2019. At its peak, FTX amassed a valuation of approximately $32 billion and was the third largest cryptocurrency exchange in the world by volume.

The busy atmosphere and rapid growth of both Alameda and FTX increased the strain on those at the helm. The Wall Street Journal previously reported that stimulant use was common among those at the top of Bankman-Fried. Ellison tweeted last year: “Nothing like regular amphetamine use to make you appreciate how stupid a normal, unmedicated human experience is.”

Sam Bankman-Fried

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during the Institute of International Finance (IIF) Annual Member Meeting in Washington, DC, U.S. on Thursday, Oct. 13, 2022. This year’s scam (Photographer: Ting Shen/Bloomberg via Getty Images/Getty Images)

In October 2021, Ellison was named co-CEO of Alameda with Sam Trabucco. She became CEO in August 2022 when Trabucco announced on Twitter he was stepping down from the role. Trabucco said riding Alameda alongside Ellison was “difficult, exhausting and consuming” but added that he would “remain as an advisor.”

Cryptocurrency prices were near all-time highs in the fall of 2021, but by early 2022, digital currencies were plummeting, and many investment and lending companies in the sector were facing financial pressure.

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FTX crash

As of early November of this year, reports regarding the financial health of Alameda and FTX were mounting. Rival cryptocurrency exchange Binance has scuttled a tentative plan to acquire FTX after due diligence revealed what Binance CEO Changpeng Zhao called a “chaotic” balance sheet in an interview with Fox Business’ Susan Li.

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The interconnected relationship between the two firms eventually led to their collapse, as FTX lent billions of dollars of customer funds from the exchange to Alameda in an effort to shore up the firm’s finances. When unnerved investors went to withdraw funds from FTX, it was unable to meet those demands and plunged into insolvency.

During a video meeting earlier this month before the firm and FTX filed for bankruptcy, The Wall Street Journal reported that Ellison briefed Alameda staff on FTX’s use of client funds to help Alameda make met its liabilities and added that she, Bankman-Fried and other members of the firms’ management were aware of the decision.

Kayla Bailey and Aislinn Murphy of Fox Business contributed to this report.

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