Alameda Research CEO Caroline Ellison is a math whiz who loves Harry Potter, fringe political philosophy and taking big risks. She is also one of the supporting players in Sam Bankman-Fried's FTX catastrophe.
By David Jeans, Sarah Emerson, Richard Nieva and Michael del Castillo
In 2021, Caroline Ellison, the CEO of Alameda Research who oversaw crypto traders allegedly playing roulette with billions of FTX’s customer funds, was asked if she had any advice for her younger self. Her reply was earnest and brief.
"I would tell her to be less risk-averse and believe in herself more," she wrote in a previously unpublished application for Forbes’ 30 Under 30 list.
A year later, that advice reads as a stunningly ironic epitaph for one of the biggest financial catastrophes in recent memory, one Ellison herself presided over. Last week, FTX, once the second largest crypto exchange in the world, collapsed into a $32 billion pile of risky bets and worthless tokens that the former Enron attorney who has taken over FTX said is the biggest “failure of corporate controls” he’s seen in his career. And Alameda, the company Ellison helms, was one of its architects.
It was Alameda’s speculative investments that were allegedly made by using FTX customer deposits, taking billions without users’ knowledge. And it was Alameda that reportedly covered up the scheme because the hedge fund ensured the assets it was trading on FTX steered clear of its own balance sheet. In a bankruptcy filing, FTX estimates it will have more than one million creditors seeking damages — FTX’s rank and file, who reportedly were convinced to pour their life savings into the platform, among them. The filings also show that Alameda Research handed out three personal loans to FTX executives, with Bankman-Fried borrowing $1 billion. And while FTX CEO Sam Bankman-Fried owned 90% of the trading firm, it was Caroline Ellison at Alameda’s helm when both companies collapsed.
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There is little publicly available information about Ellison, but conversations with eight people who knew her, and a previously unpublished interview she gave to Forbes last October, paint a rough picture of a quiet math nerd who climbed the crypto hierarchy until it all went bust. Over the course of a few years, Ellison’s wholehearted embrace of Bankman-Fried’s “new jazz” financial hijinks pitched her into an ever-widening crypto gyre of bullshit, deceit and desperation. She did not respond to multiple comment requests for this story.
“There are a lot of people who are very smart, but aren’t good, necessarily, at the messy world of trading—especially crypto.”
Before she found herself at the center of crypto’s most massive meltdown, Caroline Ellison was a star student. She was a Harry Potterhead. She was a camp counselor. She was a writer of live action role playing scenes. Ruth Starkman, a math professor who taught Ellison at Stanford 10 years ago, called her former student “bright, focused, very mathy” — a challenge, she said, to reconcile with Ellison becoming wrapped up in one of the largest alleged frauds of the past decade.
“The first I heard of the current controversy was when people started contacting me on LinkedIn, telling me to withdraw my endorsement of her skill as a computer scientist,” Starkman told Forbes.
Now, as the life-savings obliterating carnage of FTX’s collapse comes into clearer focus, and multiple U.S. agencies — including the Securities and Exchange Commission and the Department of Justice — have announced investigations, Ellison seems headed towards a nadir that belies her pedigree and the experiences of people who knew her in a past life, a risk taken and gone catastrophically bad.
“Being comfortable with risk is very important,” Ellison said on a podcast in May. “There are a lot of people who are very smart, but aren’t good, necessarily, at the messy world of trading—especially crypto.”
“Their whole goal was to maximize wealth,” an early Alameda employee said. “They never lived in a world where they weren't risking a lot.”
In March 2018, Caroline Ellison was working at the quant-trading firm Jane Street when one of her former colleagues approached her with a proposition that would change her life.
Over coffee in California, Sam Bankman-Fried, a disarmingly aloof crypto entrepreneur, pitched her about joining Alameda Research, a new digital currency hedge fund he was working on that would exploit the differences in pricing for Bitcoin in different countries. It was the perfect arbitrage, he said. The exchange would help him toward his goal of "earning to give" billions to charity.
"I was like, wow, that sounds pretty exciting. I mean, I really love Jane Street,” Ellison told Forbes in a previously unpublished interview in October 2021. “It was a really hard decision to leave."
But Ellison did leave, abandoning her cushy job for a gig at a crypto Icarus that came crashing down in spectacular fashion last week. Behind both Alameda and FTX was Bankman-Fried, a bloviating then-billionaire founder, who had founded the FTX two years after Alameda to build what he considered a modern cryptocurrency exchange. When Bankman-Fried decided to step away from Alameda to focus full-time on the fast-growing FTX, Ellison, a quiet and quirky child of MIT economics professors, took over as co-CEO.
As FTX cartoonishly imploded, going from “Assets are fine” tweets to bankruptcy in four days, attention turned to Alameda’s $10 billion in assets and its alleged practice of funneling FTX’s customer deposits to invest in risky speculative bets. Multiple crypto companies once seen as industry pillars are now on the verge of the same fate. While the daily headlines document years of alleged wrongdoing, the spotlight has broadened beyond Bankman-Fried to his inner circle, and landed on Ellison, a rare female leader in a male dominated industry.
“Their whole goal was to maximize wealth,” an early Alameda employee said. “They never lived in a world where they weren't risking a lot.”
“This was very much like, oh, yeah, we don’t really know what we’re doing.”
The daughter of esteemed economists — her father, Glenn Ellison, is currently the head of economics at the Massachusetts Institute of Technology, and her mother, Sara Fischer Ellison, is an economics department lecturer at the university — she grew up outside of Boston, in a household filled with numbers. While other kids were playing with Lego, Ellison was learning about Bayesian statistics before middle school; one year, rather than write her father a birthday card, she presented him with an economic study of stuffed animal prices at Toys ‘R’ Us. “We definitely got exposed to a lot of economics,” Ellison previously told Forbes in an interview.
A natural mathematician, high school was a laboratory for Ellison’s love of numbers and she competed multiple times in the Math Prize for Girls, the national contest that draws the country’s brightest young minds. But her interests went far beyond math, and as a senior, she received an honorable mention in a linguistics olympiad. She also loved books—her parents read her the first Harry Potter book when she was 3, she said, then she read the second one on her own at age 5. (She has apparently described herself as a Ravenclaw.)
By the time Ellison arrived at Stanford as a math major in 2012, her professional ambitions were taking shape, and while adjusting to college life, she took to Tumblr to publish her daily musings. The now-deleted blog, called WorldOptimization, is unsigned but a close associate confirmed that it was hers. In it, she wrote that "the sexual revolution was a mistake" and that she believed “women are better suited to being homemakers and rearing children than doing Careers." She also mused about race science, in one post saying the "genetic differences there are massive" when it comes to Indian people from different provinces and castes — which has become a source of discrimination in Silicon Valley. And at the top of her list of “~cute boy things~” was “controlling most major world governments.”
Ellison has since downplayed what she took away from college. Last year, when asked by Forbes about one thing she didn't learn there that would have helped her in the real world, she replied, "Pretty much everything. Taxes?"
One thing she did pick up: an affinity for a philosophy called effective altruism. Popular in Silicon Valley, the movement calls on people to use data to maximize their efforts to have a positive impact on the world. It was pioneered by a group of philosophers that included Will MacAskill, who Bankman-Fried says convinced him to get rich for good — and who would later join the philanthropic arm of FTX, Future Fund, before resigning last week. At Stanford, Ellison joined the effective altruism club on campus and became its vice president.
Doubt now has emerged over whether Ellison, Bankman-Fried or their compatriots actually believed in the tenets of effective altruism, or if it served as an effective way to shield their alleged wrongdoing. In text messages published by Vox on Wednesday, a reporter asked Bankman-Fried if his talk about ethics was “mostly a front.” His response: “yeah.” Ellison at one point, perhaps in a moment of sardonic self-awareness, appeared to have renamed her blog “Fake Charity Nerd Girl.”
“It's pretty nice for us to have two people who can take ultimate responsibility for things.”
After Stanford, Ellison became a trader at Jane Street, where she met Bankman-Fried. They bonded over their mutual interest in effective altruism. “They were very much into [Effective Altruism], a lot of people at Jane Street were, and that was typical,” said Tom Gill, a former trader at Jane Street who worked with Ellison and Bankman-Fried. “The idea was that the best thing for the world is for me to become extremely wealthy, and then donate it…it’s incredibly self-serving.”
After Bankman-Fried convinced her to jump ship for Alameda in 2018, Ellison realized she’d arrived at a haphazard startup. “This was very much like, oh, yeah, we don’t really know what we’re doing,” Ellison told Forbes. There, she also met Bankman-Fried’s confidants Nishad Singh, Gary Wang, and soon after, Sam Trabucco, each of whom would take executive roles alongside Bankman-Fried. They, too, shared a quiet bond over their interest in effective altruism.
At the end of 2018, Bankman-Fried moved the company’s headquarters from Berkeley, California to Hong Kong. The city’s favorable regulatory environment, and presence of other major crypto firms like Binance and Crypto.com, meant Alameda had to be there, Bankman-Fried reasoned, according to an early employee. The team ping-ponged between half a dozen WeWorks across the city for the next few months, including one office rented solely for the purpose of stockpiling beanbags. In the largely male-dominated office, one employee recalled Ellison watching the royal wedding of Prince Harry and Meghan Markle with glee, while her colleagues were absorbed in the video game League of Legends.
But Bankman-Fried’s next act was already underway, and he launched FTX in 2019 thanks to initial funding from Binance. Short for “Futures Exchange,” the genesis of FTX was a sort of Alameda skunkworks “crazy side project,” Ellison told Forbes. With him tending to his new exchange — and rapidly becoming known as a crypto czar — Ellison rose at the trading firm, becoming co-CEO of Alameda alongside Trabucco in the summer of 2021. Trading around $5 billion a day, the role pushed Ellison to the forefront of the industry.
Soon after, Ellison and Trabucco were featured on the Forbes 30 Under 30 list. “It's pretty nice,” she said in an interview at the time, “for us to have two people who can take ultimate responsibility for things.”
“I think I've partly just gotten fairly lucky.”
Over the past two weeks, much has been speculated about the romantic ties between Ellison and Bankman-Fried, which Bankman-Fried confirmed by telling the New York Times that the two were no longer involved. A CoinDesk report claimed that Ellison had serially dated Bankman-Fried, and alleged that both were among a group of 10 roommates who’d been intimately involved at some point. The exact contours of the pairings are unknown, but public Venmo transactions between Nishad Singh, Sam Trabucco, and FTX chief of brand and people Cindy Watanabe show them paying one another for domestic trappings like “kale,” gas and laundry.
Years earlier, Ellison had apparently written on Tumblr, with indeterminate seriousness, that after exploring polyamory, she believed that “everyone should have a ranking of their partners, people should know where they fall on the ranking, and there should be vicious power struggles for the higher ranks” — a dynamic she equated to a “imperial Chinese harem.”
As murky as the executives’ relationships were with each other, so was the connection between Alameda and FTX, which rapidly overshadowed its sister company. Bankman-Fried courted investors Sequoia, NEA and Lightspeed Venture Partners, and FTX customer deposits soared with more than a million users. But even investors were sometimes in the dark about Alameda’s role.
As Alameda faded into the background, Ellison became virtually invisible, according to people working at FTX and at companies that transacted with the exchange and Alameda. The CEO of one project that received funding from Alameda told Forbes they never interacted with her, despite the trading firm’s investment. “She signed off on the agreement though,” they recalled. And, for the most part, Ellison seemed happy to remain behind the scenes — existing to the outside world as a blurry Twitter avatar and the handle @carolinecapital.
Ellison found herself in sole control of Alameda when Trabucco stepped down as co-CEO in April, months before he publicly announced his departure in August, according to a former Alameda employee. On Twitter. Trabucco said the role was “exhausting and consuming” and he had recently been “not really working at all.” The former Susquehanna trader, who graduated from MIT a year after Bankman-Fried, said he was leaving after having “significantly reduced” his role over the past few months. “It's been an incredibly formative experience working with @AlamedaTrabucco,” Ellison tweeted at the time. “I hope he has a great time on his boat!”
A few months later, everything began to crumble. Last week, Binance CEO Changpeng Zhao announced his company would acquire FTX, rescuing it from a liquidity crisis. But Binance quickly backed out of the deal after due diligence, citing “mishandled customer funds and alleged U.S. agency investigations.” In the space of a few days, Bankman-Fried’s empire faced a stunning collapse, and several of his entities petitioned for bankruptcy, including Alameda.
Now, the Justice Department and SEC, along with local authorities in the Bahamas, are investigating the situation. Questions are swirling about how Alameda lost all the customer funds that FTX allegedly transferred in order to prop up the floundering firm. Bankman-Fried’s lavish Bahamian penthouse is reportedly up for sale for $40 million. And Ellison, once a background figure in the outsize shadow of Sam Bankman-Fried, has risen to her own level of infamy.
Rumors are swirling online that Ellison is planning to flee Hong Kong for Dubai, which does not have an extradition treaty with the U.S., but her whereabouts are currently unknown. Her last public statement was a pair of tweets on November 6, defending criticism of the company’s balance sheet.
Six months ago, during an interview with crypto podcast El Momento, Ellison was asked if she could go back in time, would she “make any sort of changes?" At the time, the so-called crypto winter had begun to have a chilling effect on many companies and markets, but FTX was still solvent.
"I'd definitely keep the same thing. I mean, I think I've partly just gotten fairly lucky," she said, laughing. "I don't think if I went back and chose a different random path, it would have worked out this well."
Correction: An earlier version of this story included details noting that some alt-right leaning supporters of Ellison refer to her as “Queen Caroline.” One source who confirmed those details now claims them to be false. They have been removed from the story, and the headline updated. The story has also been updated to correct a misattributed a quote about "genetic differences between groups of humans,” and the spelling of the name of Ellison’s math teacher at Stanford. She is Ruth Starkman, not Ruth Ackerman.
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