Caroline Ellison Sentenced to Two Years for Role in FTX Fraud, Despite Cooperation with Prosecutors

Caroline Ellison, a former cryptocurrency executive, was sentenced to two years in prison for her involvement in the theft of $8 billion in customer funds from the now-bankrupt FTX exchange, founded by her ex-boyfriend Sam Bankman-Fried. The sentencing occurred despite the judge acknowledging her extensive cooperation with prosecutors in the case.

During the sentencing hearing at the Manhattan federal court, U.S. District Judge Lewis Kaplan made it clear that he was uncomfortable with the idea of remorse and cooperation serving as a “get out of jail free card” in such a serious matter. Prosecutors have described Bankman-Fried’s actions as one of the largest financial frauds in U.S. history.

Ellison, 29, had pleaded guilty to seven felony counts of fraud and conspiracy. She also testified as a key witness for the prosecution in Bankman-Fried’s trial. Bankman-Fried, who was convicted of fraud and related charges, is currently serving a 25-year prison sentence following FTX’s collapse in 2022.

Although Ellison’s charges carried a potential maximum sentence of 110 years in prison, her legal team argued for no prison time due to her cooperation with the investigation. Prosecutors also requested leniency for Ellison.

Judge Kaplan, however, emphasized her significant role in the fraud. “You are gravely culpable in this fraud,” Kaplan told Ellison, while acknowledging that her “remarkable cooperation” created a “fundamental distinction” between her and Bankman-Fried. “There’s no way you’re ever going to do something like this again, I am persuaded,” Kaplan said. “But here’s the thing: this was, if not the very greatest financial fraud ever perpetrated in this country or anywhere else, close to it.”

After the sentencing, Ellison sat quietly, hands crossed on her lap, and looked down at the defense table. Earlier, she addressed the court, speaking quickly as she read from a prepared statement. “Not a day goes by when I don’t think about all the people I hurt,” Ellison said. “My brain can’t even truly comprehend the scale of the harms I’ve caused. That doesn’t mean I don’t try.”

Ellison, who graduated from Stanford University, had run Alameda Research, the cryptocurrency hedge fund founded by Bankman-Fried, from 2021 to 2022. She admitted to contemplating leaving the firm many times but felt influenced by Bankman-Fried. “Every time I thought about it, I heard Sam’s voice in my head,” Ellison said. “Ignoring that voice in my head and speaking out would have been brave,” she added, becoming emotional. “I’m sorry I wasn’t brave.”

Despite not recommending a specific sentence, the U.S. Attorney’s Office in Manhattan, which brought the charges against her, encouraged the court to show leniency. “I cannot overstate the importance of Ms. Ellison’s testimony in convicting Sam Bankman-Fried,” prosecutor Danielle Sassoon said, noting that Ellison met with prosecutors around 20 times to help them build their case. “Unlike Bankman-Fried, she is not cunning. There is no evidence she was driven by greed, or that an appetite for risk or power was part of her nature,” Sassoon added.

Ellison’s attorney, Anjan Sahni, urged the court to consider sparing her from prison, saying it “would send a powerful message about the value of timely, honest, and full cooperation with the government in cases of financial crime.” Sahni emphasized that Ellison’s “honesty and openness” played a crucial role in securing the conviction against Bankman-Fried.

Judge Kaplan said he would recommend that Ellison serve her sentence in a minimum-security prison, starting in November. Ellison may be eligible for early release, a few months shy of two years, if she demonstrates good behavior while incarcerated.

Two other former FTX executives who cooperated with the prosecution, Nishad Singh and Gary Wang, are set to be sentenced on October 30 and November 20, respectively.

Sam Bankman-Fried, 32, became one of the wealthiest figures in cryptocurrency during the COVID pandemic, with a reported net worth of $26 billion by October 2021, according to *Forbes*. He gained prominence as a donor to various philanthropic causes and Democratic politicians. However, his fortune disappeared when FTX collapsed in November 2022 amid mass customer withdrawals. Bankman-Fried was charged the following month with stealing customer funds from FTX to cover losses at Alameda. Ellison pleaded guilty in December 2022.

During Bankman-Fried’s trial, Ellison testified for three days, stating that Bankman-Fried had directed her and others to misappropriate customer funds without their knowledge. Bankman-Fried is currently appealing his conviction and sentence.

By fLEXI tEAM