At an exclusive party in the Bahamas last spring, FTX founder Sam Bankman-Fried was perched atop a patio railing, mingling with pop star Katy Perry and actor Orlando Bloom. FTX was one of the hottest cryptocurrency exchanges of the moment, and Bankman-Fried was surrounded by people vying for attention.
Across the patio, keeping to herself, was one of Bankman-Fried’s key lieutenants, Caroline Ellison, who ran the crypto trading firm he founded, Alameda Research. She didn’t appear fazed by the celebrities, and party-goer David Micley found it easy enough to strike up a conversation with her.
“She didn’t seem like a person that took herself too seriously or thought of herself as too important,” said Micley, who works in the crypto industry and described the party scene to the Globe.
Ellison did not mention her position at Alameda for a few minutes and didn’t say much about her work, Micley said. Instead, the two made small talk after discovering they were both from Newton.
Seven months later, Ellison is now very much the subject of attention. In a few stunning days, FTX went from being a darling of the crypto industry to filing for bankruptcy — and its close relationship with Alameda is at the center of the collapse.
A Nov. 2 story from CoinDesk showed that much of Alameda’s assets were held in FTT, the trading token issued by its sister company. That sparked liquidity concerns and a series of cascading events, with investors withdrawing some $5 billion from FTX and a bailout from investors falling through.
FTX, Alameda, and other subsidiaries filed for bankruptcy protection on Nov. 11, and Bankman-Fried resigned as CEO of FTX. The same day, The Wall Street Journal reported that FTX lent customer funds to Alameda, which was against the exchange’s terms of service agreement. Ellison was fired as CEO of Alameda, and investigators in the United States and the Bahamas are trying to determine what happened.
Now, those who knew the 28-year-old from Massachusetts wonder how she got involved in the Wild West of the crypto industry in the first place. A child of two members of the faculty at MIT, Ellison sailed through high school, won accolades for her excellence in math, attended Stanford University, and worked on Wall Street.
Ellison did not respond to multiple requests for an interview, and her parents would not comment for this story. What is known about her comes from conversations and online exchanges with more than a dozen people who knew her — high school classmates, teachers, acquaintances — as well as her Tumblr blog and podcast interviews she’s given in recent years.
Together, they paint a picture of a brainy, well-educated, and ambitious woman who was bred for success, but, for now, is associated with a spectacular failure.
Ellison grew up in the Boston suburbs and was known for her smarts from an early age. In an interview she gave for a podcast in 2020, she recalled her parents reading the first “Harry Potter” book to her at age 3. When the second book came out two years later, the 5-year-old read it herself.
“I refused to wait for my parents,” Ellison quipped in the interview.
Her father, Glenn Ellison, began teaching at MIT in 1994, the year she was born, and her mother, Sara Fisher Ellison, joined MIT a year later. Both still work there, with Glenn Ellison heading the economics department and Sara Fisher Ellison serving as a senior lecturer.
The Ellisons lived in Cambridge in the ‘90s before moving into a large house in Newton Corner. Caroline and her younger sister, Anna, began competing in math competitions in middle school; their father served as the team’s coach.
Caroline attended Newton North High School, graduating in 2012, and was the captain of the math team as a senior. She played the cello and was in clubs for Nordic skiing and Jane Austen fans. Several of Ellison’s teachers said they remember her as a shy, smart, and respectful student, but declined to comment further.
Her high school class had its 10-year reunion at a Sons of Italy hall in Waltham the night before Thanksgiving. Though Ellison didn’t attend, she was a hot topic. Over pizza, tequila shots, and the blaring sound of old party hits, her former classmates told a Globe reporter at the event that Ellison had a small circle of friends and was known for taking high-level courses.
Lena Golick, 29, who took Chinese classes with Ellison, remembered her as “incredibly smart, super nice, [and] quiet.”
“Most things came naturally to her,” Golick said. “It did not surprise me that she ended up a CEO so young.” What surprised her was that Ellison would be associated with a scandal. “She never cheated, that was definitely not her,” Golick said.
Adriana O’Connor, 28, said she took an English class with Ellison. “She would leave early, telling everyone, ‘I’m going to math class at MIT,’ ” O’Connor said in a phone interview. “She wasn’t humble.”
Ellison attended Stanford University, where she studied mathematics and joined a club for effective altruism, a philosophical movement that encourages people to use logic and reasoning to figure out how to do the most good. After graduating in 2016, Ellison got hired as a quantitative trader at Jane Street Capital in New York.
There, she met Bankman-Fried, who had joined after graduating from MIT. Bankman-Fried left Jane Street in 2017 to start Alameda Research, a trading firm that made money by buying and selling crypto on different markets. On one podcast, Ellison said Bankman-Fried first told her about the business over coffee in Berkeley, Calif., where Alameda was originally headquartered.
“I didn’t just randomly decide to do crypto on my own,” she said on an FTX podcast in July 2020.
Ellison joined Alameda as a trader in 2018 and immediately noticed how different it was to trade crypto at a startup, compared to equities at an established firm such as Jane Street. She also saw how moving quickly in the nascent crypto market could be more lucrative. “As a trader, the most fun thing is to make money,” she said on a podcast.
In 2019, Bankman-Fried founded the crypto exchange FTX in the Bay Area, relocating first to Hong Kong and then the Bahamas in search of a more favorable regulatory environment. Alameda also shifted operations to Hong Kong, and Ellison moved there in 2019.
In response to concerns about a potential conflict of interest between his trading firm and crypto exchange, Bankman-Fried stepped down as chief executive of Alameda in August 2021 and named Ellison and MIT grad Sam Trabucco, also a trader at Alameda, co-CEOs. (Trabucco attended Roxbury Latin School, and he and Ellison were in the same math circles growing up, both earning top honors at the 2008 American Mathematics Competition.)
“It’s all young, smart people running the crypto stuff,” said Jon Paul Roby, 29, president of Ellison’s graduating high school class. “We all joke that Newton was bound to produce someone like this,” he said, referring to Ellison.
Some question whether book smarts prepared Ellison to run a trading firm and manage billions of dollars in capital at such a young age.
Months before she was named co-CEO, she wrote on her blog that she didn’t “have that much responsibility” at work. “What do CEOs of real companies do?” she wrote. In a podcast, Ellison claimed to only need “elementary school math” to do her job, a comment that raised eyebrows.
“Anyone that’s in the trading industry that has seen those interviews, their jaw hits the floor,” said Matt Walsh, founding partner of Cambridge-based Castle Island Ventures, which invests in blockchain startups.
In August of this year, Trabucco resigned from Alameda, leaving Ellison as the firm’s sole leader.
According to a report in The Wall Street Journal, which cited anonymous sources, Ellison told Alameda employees in a video call that she knew FTX sent customer funds to Alameda, and that her company used the money to cover its liabilities. She said Bankman-Fried and other top FTX executives knew about the decision, as well.
Since the rapid collapse in November, Ellison has been quiet. By contrast, Bankman-Fried has been anything but. In several interviews or public appearances, he has made eye-popping statements about the internal operations of the firms, and what role he did — or did not — play in their demise.
For example, in a virtual interview at The New York Times DealBook Summit last week, Bankman-Fried said he didn’t try to commit fraud or knowingly send FTX customer funds to his trading firm.
“I wasn’t running Alameda, I didn’t know exactly what was going on,” he said in the interview. “I haven’t been making those decisions.”
While much remains to be pieced together, a quip Ellison made about the crypto industry on her blog earlier this year may have more of a ring of karma to it than she intended.
“Yeah, it’s mostly scams and memes when you get down to it,” she wrote.