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A Manhattan federal judge on Tuesday handed down a two-year prison sentence to Caroline Ellison, who assisted one of the largest financial crimes in U.S. history while overseeing a trading firm connected to the FTX cryptocurrency exchange but then served as a key government witness in the trial of FTX founder Sam Bankman-Fried.
Ellison pleaded guilty to seven felony counts of conspiracy and fraud and the federal sentencing guidelines called for 110 years behind bars, but in handing down the much lighter sentence Judge Lewis Kaplan pointed to her complete cooperation with prosecutors and reliable testimony during Bankman-Fried’s trial. In addition to the prison time, Ellison was ordered to forfeit $11 billion, the same amount the court ordered Bankman-Fried to turn over.
“I’ve seen a lot of cooperators in 30 years. I’ve never seen one quite like Ms. Ellison,” Kaplan said, according to Bloomberg’s reports from inside the courtroom, going on to describe her as “vulnerable” and “exploited.”
In a pre-sentencing memo, federal prosecutors recommended lenient sentencing for Ellison, who they said met with government investigators more than 20 times and provided valuable document review in addition to testifying against Bankman-Fried. Her testimony, the prosecutors wrote, was “critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing.” They noted that Ellison agreed to cooperate with investigators within days of FTX’s bankruptcy declaration and that throughout the trial she was subjected to “extremely personal and probing” public scrutiny after Bankman-Fried leaked her diary to the New York Times.
Speaking during the sentencing hearing, Ellison apologized for not being brave and said that “since the collapse of FTX, it’s been a relief to be completely honest and open with prosecutors and investigators,” according to Bloomberg.
Ellison was the CEO of Alameda Research, a cryptocurrency trading firm connected to FTX, and assisted SBF in defrauding lenders and customers out of billions of dollars. Between 2019 and 2022, Bankman-Fried and other company executives misappropriated customer deposits in FTX to give themselves loans, make venture investments, donate to political campaigns, and repay Alameda Research’s lenders. Ellison was a knowing participant in the scheme, at one point preparing fraudulent financial spreadsheets for Alameda’s lenders that overstated its assets, understated its liabilities, and hid the fact that the firm had misappropriated $10 billion in FTX customer deposits to cover its spending and to make $5 billion in personal loans to FTX executives.
Prosecutors described Bankman-Fried, who was sentenced to 25 years in prison earlier this year, as the driving force behind the fraud while Ellison was an accomplice who occasionally raised concerns. The pair had an on-again, off-again romantic relationship and SBF “wielded significant influence over Ellison in their personal and professional relationship,” they said. While Ellison knew what she was doing was wrong and likely illegal, she also tried, unsuccessfully, to convince Bankman-Fried not to use FTX customer deposits to fund billions of venture investments. And days before FTX declared bankruptcy in November 2022, Ellison candidly explained to an all-hands meeting at Alameda how FTX customer funds had been misappropriated.
“She accepted full responsibility from her very first proffer and did not minimize or shift blame,” prosecutors wrote in their pre-sentencing memo. “She was candid that although she raised concerns with Bankman-Fried at several points along the way, she ultimately put up minimal resistance to participating in wrongdoing and deceit. She was also honest that she became more comfortable with lying and deceit the longer she worked at Alameda.”
