Caroline Ellison, the former CEO of Alameda Research and key witness in the trial against her former boyfriend and FTX founder Sam Bankman-Fried, was sentenced to two years in prison on Tuesday for her role in the collapse of the cryptocurrency exchange FTX. In addition to the prison term, Ellison was ordered to forfeit $11 billion. The sentencing comes as part of one of the largest financial fraud cases in U.S. history, in which FTX, once valued at $32 billion, imploded in late 2022.
The sentence handed down by Judge Lewis Kaplan in Manhattan's federal court was stricter than the federal Probation Department's recommendation of supervised release without prison time. Despite this, Ellison's two-year sentence pales in comparison to the potential maximum of 110 years she could have faced. This leniency was largely a result of Ellison's extensive cooperation with prosecutors, which was instrumental in securing Bankman-Fried's conviction. Bankman-Fried was sentenced to 25 years in prison earlier this year for orchestrating the fraudulent scheme that saw billions of customer funds misappropriated.
While acknowledging her cooperation, Judge Kaplan emphasized that Ellison's involvement in the fraud was still "gravely culpable" and that her remorse and assistance, while genuine, could not serve as a "get-out-of-jail-free card." During the hearing, Ellison, visibly emotional, expressed deep regret for her actions, apologizing to those she had hurt and acknowledging the lasting impact of the fraud on the lives of many.
"I'm ashamed of what I did," Ellison said through tears. "I should have walked away from FTX and Sam long before, but I wasn't brave enough to do so. I will regret that decision for the rest of my life."
Caroline Ellison's fate hangs in the balance. Her cooperation in the FTX scandal was "extraordinary," helping convict Sam Bankman-Fried. Will she get jail time or leniency for her role in one of the biggest financial frauds ever? #FTX #CarolineEllison #WhiteCollarCrime… pic.twitter.com/ll4Mwtx8Ar — Guillermo Farrell (@guille_farrell) September 24, 2024
Ellison had been a central figure in the operations of both FTX and Alameda Research, the hedge fund that received much of the $8 billion in customer funds misappropriated from the exchange. During the trial, she testified that under Bankman-Fried's direction, Alameda used customer funds to support its trading operations and other investments. Her testimony provided crucial evidence, including fake spreadsheets that concealed the extent of the misuse of funds, which Kaplan referred to as "one of the huge pieces of evidence in the case."
Assistant U.S. Attorney Danielle Sassoon praised Ellison's cooperation, describing it as "extraordinary." She noted that Ellison's truthfulness throughout the investigation played a pivotal role in convicting Bankman-Fried, but she refrained from downplaying Ellison's responsibility in the fraudulent scheme.
Ellison's attorney, Anjan Sahni, argued for leniency, stating that she had "recovered her moral compass" and had shown profound remorse. He highlighted how Ellison's cooperation had not only come at a personal cost but also played a significant role in bringing justice to the case.
Ellison's cooperation began in December 2022 when she reached a plea deal with prosecutors, pleading guilty to charges of conspiracy and financial fraud. In contrast, Bankman-Fried chose to stand trial and denied any criminal conduct. His decision led to a conviction on seven counts of fraud, with his 25-year prison sentence reflecting the massive scale of the FTX collapse.
Ellison's involvement in the FTX empire was not only professional but personal, given her romantic relationship with Bankman-Fried, who operated the exchange out of a luxury apartment complex in the Bahamas. The once high-flying couple had built a dual business empire in the cryptocurrency world, with FTX's rapid rise turning Bankman-Fried into a billionaire and a prominent figure in global finance.
While Ellison's sentencing marks a key moment in the ongoing fallout from the FTX scandal, the legal repercussions are far from over. Other FTX executives, including Gary Wang and Nishad Singh, who also pleaded guilty and cooperated with prosecutors, are awaiting sentencing later this year.
Ellison remains free on bail until her scheduled surrender to prison on or after November 7. Meanwhile, Bankman-Fried has appealed his conviction, claiming that Kaplan was biased during his trial.
