“The only moral rule that mattered was maximum utility.”

In New York, Caroline Ellison testifies in court about the bankruptcy of the FTX stock exchange. There are some scandalous insights in founder Sam Bankman-Fried’s statement of close trust.

It would probably be best if we simply left the drama surrounding the FTX exchange and its founder Sam Bankman-Fried behind us. The stock market is bankrupt, Sam will almost certainly go to prison, and the crypto world will heal.

However, the trial of Sam Bankman-Fried is currently taking place in New York, which is bringing some pearls to light. One of them was the interrogation of Caroline Ellison, Sam’s ex-girlfriend and head trader at FTX or Alameda Research. Hardly anyone was as deeply involved in Sam’s machinations, both personally and professionally, as she was.

The defense also tried to take advantage of this. Sam’s lawyer accused Caroline of being to blame for the upheavals at Alameda Research, while Bankman-Fried had merely responded appropriately to the problems. The buck should be passed to the young woman, who responded with her statements.

This completes the picture of a stock exchange that was run with maximum criminal energy and a founder who considered his own mission for the world to be so important that he subordinated almost everything to it.

In Sam’s worldview, Caroline explains, lying and cheating were morally permissible, if not required, as long as they served the right purpose. “The only moral rule that mattered to him was maximum utility.” This philosophy of “utilitarianism” simply states that anyone who wants to do good must be prepared to first accumulate money and power without any scruples.

“When I started working at Alameda, I had no idea that I would be sending false financial statements to our lenders or embezzling customer deposits,” Ellison admits, “but over time I got used to it.” Sam’s utilitarianism spilled over to the young woman who had studied with him at the elite MIT university.

She then gives numerous examples. At one point, Alameda’s funds got stuck on Chinese exchanges Huobi and OKX. When a lawyer couldn’t get her released, Ellison opened new accounts using Thai prostitutes’ documents to make transactions that would free up the funds. After that also failed, FTX paid a bribe.

However, the misappropriation of customer funds is likely to be more serious. Ellison clearly states that customers’ deposits were used by FTX to repay loans. If a large number of customers were to withdraw funds at once, there would be a shortage of funds. “I was really stressed out about it and in a constant state of terror.”

Of the $12 billion that customers had deposited on FTX, only $4 billion was left. The rest had gone to Alameda Research, which was already drowning in debt at that point, or as a loan to Sam Bankman-Fried, who had used it, among other things, to buy luxurious real estate in the Bahamas or invest in other companies.

Caroline also talks about some of Sam’s previously little-known plans. One of his big goals was to “get the regulators to take tougher action against Binance,” which for Sam was “potentially the best way to increase FTX’s market share.” In discussions with regulators in the US, they had, said Caroline, this was also promised, but it never happened.

Another goal of Sam’s was to buy SNAP, Snapchat’s parent company. Also on Caroline’s to-do list was collecting money from Mohammed bin Salman, a Saudi prince.

Caroline and Sam had been together for a few years. She was one of his closest employees during this time and afterwards, which, according to her, was sometimes strange. Looking back, her time at FTX was dark for her. She had to lie, embezzle customer funds, and live in constant fear that a bank run would occur.

All of this served the high goal of Sam achieving his goals. What’s a lie if something good comes out of it in the end? Sam dreamed, Caroline explains, of becoming President of the United States. He calculated a five percent chance of this. But even before that, with his numerous donations to aid and political organizations, he had passed on the money that he didn’t have but took from customers to causes that apparently seemed more important to him.

All of this had been stressful for Caroline. When FTX finally collapsed in the fall of 2022, it was the most terrible week of her life, she says – but at the same time a huge relief. Finally the lying was over.

The court will have to decide to what extent this is just another layer of lies and whether she is really the victim of Sam’s ambition rather than a trader who manipulated markets with the same unscrupulousness as Sam.