Why did Caroline Ellison do it?

The story of Sam Bankman-Fried was obvious enough: a Shakespearean level of arrogance that led to tragedy. But I have been puzzled for some time by Caroline Ellison, the former CEO of Alameda Research and star witness of the FTX trial. Now, after her sentencing, I believe what she did is weirder and perhaps sadder.

Ellison spoke on her own behalf, beginning by apologizing to everyone she’s hurt. “I think on some level my brain can’t even truly comprehend the scale of the harms I’ve caused,” she said. “That doesn’t mean I don’t try. So to all the victims and everyone I harmed directly or indirectly, I am so, so sorry.”

Ellison went on to say that she’s always thought of herself as an honest person — and that her 2018 self couldn’t imagine being here. “The longer I worked at Alameda, the more my sense of self became inextricably intertwined with what Sam thought of me and the more I subordinated my own values and judgment to his,” she said.

There was something culty about FTX and its sister company, Alameda. The crypto industry is always on, which tends to lead to sleep deprivation among crypto traders. Many traders, including Ellison, rely on stimulants such as Adderall, which suppresses appetite and tiredness. And Ellison never really left work — instead, she went back to an apartment she shared with her friends and coworkers. Leaving would have meant abandoning her nearest and dearest. She was, as she put it, isolated. “At each stage of the process, it felt harder and harder to extricate myself and to do the right thing,” she said.

And then there was her on-and-off-again relationship with Bankman-Fried. According to her lawyer Anjan Sahni, she met Bankman-Fried when she was in college and had a crush on him “from the beginning.” Eventually, her entire world revolved around whether she made him happy or not, which resulted in diary entries like “Sam doesn’t love me because I’m not good enough for him.” She went on to write “I can become good enough for him” by, among other things, working harder. Some of this can be chalked up to inexperience; those of us who are older know this is not how a job — or, for that matter, a relationship — works.

The letters submitted on Ellison’s behalf emphasized that she was a good, kind person — focusing on her volunteering, the money she donated, her selflessness, and her perfectionist streak. Cults tend to attract good people, smart people, people who want to make the world better. And we know Ellison was already associated with something culty — effective altruism — that also purported to improve the world. 

We also know that when Ellison got caught, she immediately came clean. That was part of the reason her testimony against Bankman-Fried was so “devastating,” said prosecutor Danielle Sassoon, who asked for a lenient sentence for Ellison. She was credible “because of her candor and her refusal to minimize her own role or sidestep the most humiliating aspects of her conduct,” Sassoon said. “Unlike Bankman-Fried, she is not cunning. There is no evidence that she was driven by greed or that an appetite for risk or power is part of her nature.”

Even in sentencing her, Judge Lewis Kaplan remarked on Ellison’s testimony. “I’ve seen a lot of cooperators in 30 years,” he said. “I’ve never seen one quite like Ms. Ellison.” Her testimony was consistent and damning; she did not seek to exonerate herself. In particular, when it came to the spreadsheets of doom — the forged balance sheets that essentially sealed Bankman-Fried’s fate — it was Ellison found the document and alerted prosecutors to it. It was like she was seeking a perfect grade in cooperating with the government.

So what was Ellison’s nature? The diaries she submitted with her sentencing document show her trying hard to be better at work and include resolutions such as “take time off work and detox from Adderall.” Ellison appears to be focused on trying to optimize herself as much as possible, giving herself bulletpointed advice such as “try and get small things done and bootstrap that into increasing confidence” and “give myself positive feedback regularly.”

During her testimony, listening to her discuss making decisions during her time at Alameda was like watching a character in a horror movie make choices that played right into the killer’s hands. At any point, a willingness to be both selfish and disobedient would have saved her. “For some reason that is hard for me to understand, Mr. Bankman-Fried had your Kryptonite,” Kaplan said. 

When Ellison joined Alameda Research, for instance, she discovered Bankman-Fried hadn’t been entirely honest with her about the company’s circumstances. There’d just been a mass resignation on staff, and lenders had pulled millions. You can imagine someone else hitting the bricks — after all, Ellison’s old job at Jane Street probably would have opened doors to a lot of other places if she’d been able to handle being briefly unemployed.

But she didn’t. Instead, according to her testimony, she stayed as Bankman-Fried convinced her that lying and stealing were fine in the service of the greater good. Little by little, she got more comfortable with dishonesty, until she was sending false balance sheets to lenders and taking customer money. And as her diaries — both published in The New York Times and submitted as part of her sentencing — demonstrate, she wanted to make Bankman-Fried happy.

Maybe Kaplan had a tough time understanding why Ellison got sucked into this, but I think I have a clearer picture now. Give Ellison an authority figure, and she will try to please them — behaving as obediently as she can, stressing about how she can be better, and basing her happiness on how close she comes to perfection. A straight-A student, a reliable employee (and co-conspirator), and — eventually — a matchless cooperating witness. If this is where being a good girl gets you, I recommend being bad.