The collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange has prompted an increased focus on the role of Alameda Research and its CEO Caroline Ellison in the implosion of the company.
Ellison, 28, was raised by two MIT economists and received his bachelor’s degree in mathematics from Stanford University. She met Bankman-Fried at the trading firm Jane Street Capital. 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 activities that benefit society as much as possible. The two were reportedly involved in an on-and-off relationship. according to CoinDesk.
When Bankman-Fried left Jane Street in 2017 to start his own hedge fund called Alameda Research, Ellison joined him shortly thereafter in what she called “a blind leap into the unknown.” She became one of the senior traders of the new company and went on to say FTX related podcast that joining Alameda was “too cool an opportunity to pass up” but handling capital was “kind of daunting” when she joined the company in 2018.
“Most of the time it was something I wasn’t used to,” she said. “So it was kind of – I don’t know, I think I was like a trader, I mean, not that long on Jane Street, but a year and a half, which was kind of more trading experience than a lot of Alameda traders had at the time. I kind of wanted to get in there and be like an expert on everything, but there were still a lot of things in the crypto world that I didn’t know about.”
Alameda was a major cryptocurrency trader and commonly traded on the FTX platform, according to the Wall Street Journal. Despite being the founder and majority owner of Alameda, Bankman-Fried eventually relinquished control of its operations and primarily focused on his role as CEO of crypto exchange FTX, which he founded in 2019. In its heyday, FTX was valued at around $32 billion and was the third largest cryptocurrency exchange in the world by volume.
The fast-paced atmosphere and rapid growth of both Alameda and FTX increased the strain on those at the top. The Wall Street Journal previously reported that stimulant use was common among Bankman-Fried’s upper echelons. Ellison tweeted last year, “Nothing beats regular use of amphetamines to make you realize how stupid many normal, non-drug human experiences are.”
October 2021 was Ellison appointed co-CEO of Alameda with Sam Trabuco. She became CEO in August 2022 when Trabucco announced it on twitter He resigned from the role. Trabucco said managing Alameda alongside Ellison had been “difficult and exhausting and consuming” but added that he “will remain as an advisor.”
Cryptocurrency prices hit near all-time highs in the fall of 2021, but in early 2022, digital currencies plummeted and many investment and lending firms in the industry were under financial pressure.
In early November this year, worrying reports about the financial health of Alameda and FTX began to pile up. Rival crypto exchange Binance has scrapped a tentative plan to acquire FTX after due diligence revealed what Binance CEO Changpeng Zhao called in a “chaotic” balance sheet Interview with Susan Li from Fox Business.
The interconnected relationship between the two companies ultimately led to their collapse when FTX lent billions of dollars in client funds from the exchange to Alameda to shore up the company’s finances. When unsettled investors withdrew funds from FTX, it was unable to fulfill these requests and went bankrupt.
During a video meeting earlier this month before the company and FTX filed for bankruptcy, the The Wall Street Journal reports that Ellison informed Alameda employees that FTX was using client funds to help Alameda meet its liabilities, adding that she, Bankman-Fried and other members of management were aware of the decision.
Fox Business’ Kayla Bailey and Aislinn Murphy contributed to this report.