Caroline Ellison, the key witness in the trial of her ex-boyfriend, FTX founder Sam Bankman-Fried, was sentenced by a New York federal court on Tuesday to two years in prison and an $11 billion fine for her role in the massive fraud and conspiracy that brought down the once $32 billion cryptocurrency exchange.
The prison sentence was significantly harsher than the recommendation of the Federal Parole Board, which wanted to sentence Ellison to three years' probation and no prison time.
Defense attorneys had also called for prison time for Ellison, who ran the Alameda Research hedge fund that received much of the $8 billion in client funds that Bankman-Fried stole from FTX. The stolen money was used for Alameda's trading and other purposes.
Caroline Ellison, former CEO of Alameda Research LLC (right), arrives in court in New York on September 24, 2024.
Michael Nagle | Bloomberg |
While Kaplan praised Ellison for her extensive cooperation with prosecutors – which led to Bankman-Fried's conviction – the judge said her sentence should deter other potential wrongdoers from committing fraud.
The judge said the FTX case is likely the largest financial fraud in U.S. history and for that reason he “cannot agree to a literal get-out-of-jail-free card,” Kaplan said outside U.S. District Court in Manhattan, where Ellison's parents and two sisters watched from the courtroom gallery.
Caroline Ellison, former CEO of Alameda Research LLC, delivers her sentencing statement in court in New York, USA, on September 24, 2024.
Courtesy: Elizabeth Williams
“I have met many cooperators over the years, but never one like Miss Ellison,” said Kaplan, who also said he believes Ellison is sincerely sorry for her crimes and that her cooperation has taken a great emotional toll on her.
Assistant U.S. Attorney Danielle Sassoon urged Kaplan for leniency, citing Ellison's consistent honesty but refusing to downplay her role in the fraud. Sassoon also said she could not overstate Ellison's help in convicting Bankman-Fried.
Ellison's attorney, Anjan Sahni, urged Kaplan to give Ellison a second chance, saying she had “rediscovered her moral compass” and “deeply regretted” not leaving the sphere of influence of FTX and Bankman-Fried.
Ellison, her voice shaking and at times crying, read a statement apologizing to the people she had hurt and saying she was deeply ashamed. She also said she was sorry she had not been brave enough to turn her back on FTX and Bankman-Fried.
In this courtroom sketch, former cryptocurrency executive Caroline Ellison stands before U.S. District Judge Lewis Kaplan on September 24, 2024 during a hearing where she was sentenced to two years in prison for her role in the theft of $8 billion in customer funds from the now-bankrupt exchange FTX by her ex-boyfriend Sam Bankman-Fried. The reason for this is the two-year prison sentence in federal court in New York City, USA.
Jane Rosenberg | Reuters
Kaplan allowed Ellison to remain free on bail until she reports to prison on or after November 7.
Ellison reached a deal with prosecutors in December 2022, a month after FTX filed for bankruptcy. She pleaded guilty to conspiracy and financial fraud.
Bankman-Fried, on the other hand, chose to go to trial and was found guilty on all seven fraud charges against him in the same courthouse where she was convicted.
In March, Kaplan sentenced him to 25 years in prison and ordered him to pay a fine of $11 billion.
Bankman-Fried has since appealed his conviction and requested a retrial before a different judge, arguing that Kaplan was biased against him.
Two other former FTX executives, Gary Wang and Nishad Singh, are scheduled to be sentenced later this year. Like Ellison, they pleaded guilty rather than stand trial.
Before Kaplan sentenced Ellison on Tuesday, he compared her conduct after the indictment to that of Bankman-Fried.
Although the founder of FTX denied any criminal conduct, she cooperated with the authorities, Kaplan noted.
“Things didn't go so well” for Bankman-Fried, partly because of Ellison's cooperation, the judge said.
Kaplan thanked Ellison for providing prosecutors with seven fake spreadsheets, which he called “one of the most important pieces of evidence in the case” against Bankman-Fried.
Late Monday, Ellison's lawyers said in a court filing that they had reached financial settlements with prosecutors and the FTX debtor's estate.
The filing did not specify how much she would pay under those settlements, which are separate from the forfeiture order, but it was already known that Ellison's $10 million worth of shares in AI startup Anthropic, which have increased significantly in value since she bought them, make up the bulk of her settlements.
Both Bankman-Fried and Ellison faced the same statutory maximum sentence of about 110 years in prison for their crimes.
But defendants in criminal cases who cooperate with prosecutors rather than contest the charges – particularly in white collar crimes like FTX – often receive more lenient sentencing sentences.
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