Caroline Ellison, the former crypto executive and romantic partner of the disgraced FTX founder Sam Bankman-Fried, was sentenced to 24 months in prison in Manhattan federal court on Tuesday. Ellison was a central figure in the FTX bankruptcy saga and key witness for the prosecution in the $8bn fraud trial that ended with Bankman-Fried’s conviction.
Ellison served as the chief executive of Alameda Research, which was the trading arm of the now defunct FTX crypto exchange. The collapse of FTX, once valued at $32bn, was directly linked to revelations that it was attempting to financially prop up Alameda with fraudulent accounting. Subsequent investigations and criminal charges found that FTX and the hedge fund had used billions in customer funds for risky trades and lavish personal spending.
Judge Lewis Kaplan, the sentencing judge for Bankman-Fried and another FTX executive, delivered the ruling in Ellison’s case. Kaplan gave Bankman-Fried 25 years in prison, but there was no expectation that Ellison would face anywhere near as harsh a sentence, despite her charges carrying a maximum of 110 years in prison. Prosecutors in court filings called her cooperation in the case against Bankman-Fried “not only substantial, but exemplary”, and did not request a specific sentence, arguing for leniency during the hearing. Ellison’s attorneys asked she be sentenced to three years of supervised release with no prison time.
Kaplan took Ellison’s extensive cooperation with prosecutors into account when deciding her punishment, he said, stating her assistance to the government set her apart from Bankman-Fried’s denials and obfuscations. Kaplan told the court that in his decades on the bench, Ellison stood out as a cooperative witness, finding her testimony exceedingly consistent.
“I’ve seen a lot of cooperators in 30 years. I’ve never seen one quite like Ms Ellison,” the judge said.
But Kaplan also told Ellison that the crimes committed at FTX were serious enough that they necessitated jail time, saying that she was still culpable in the fraud. In addition to the prison time, Ellison must also forfeit about $11bn in assets.
Ellison spoke briefly during her sentencing hearing to admit that she took part in misleading customers and apologize for her role in the fraud.
“I want to start by saying how sorry I am,” she told the court.
Ellison pleaded guilty to seven charges in late 2022, which included wire fraud and money laundering, taking a plea deal that led her to become a witness against Bankman-Fried.
During Bankman-Fried’s trial last this year, she took the stand to testify in one of the most dramatic moments of the highly watched court proceedings, admitting that she committed fraud while running Alameda and telling a prosecutor that Bankman-Fried directed her to misuse FTX customers’ funds without their knowledge. Ellison’s testimony in the trial, along with that of other top executives, put the blame for FTX’s catastrophic collapse almost entirely on Bankman-Fried.
The prosecutors’ filing stated that Ellison provided valuable information in the case against Bankman-Fried, while also arguing that she had persevered through intense public scrutiny and media humiliation.
“The government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” prosecutors wrote.
Ellison’s relationship with Bankman-Fried and a digital footprint that included Tumblr posts musing on polyamory became fodder for a wave of tabloid coverage and online mockery after FTX’s dramatic implosion. While Bankman-Fried was awaiting trial last year, he also leaked Ellison’s personal writings to the New York Times in a move that resulted in Kaplan revoking his bail. Diary entries showed Ellison feeling underqualified and unprepared to run Alameda, as well as struggling over feelings related to her romantic partnership with Bankman-Fried.
Numerous friends, colleagues and family members sent in letters to Kaplan in support of Ellison. Her parents, both MIT professors, praised her charitable efforts and asked the court to forgive her conduct. A former colleague at FTX, meanwhile, claimed that Ellison’s drive to make money was the result of her belief in utilitarian ethics and desire to use her wealth to stop artificial intelligence from causing humanity’s extinction.
The same ex-colleague also stated that Ellison had found a new and supportive romantic partner, writing: “I believe that this new and kind environment will be good for her.”
Bankman-Fried, meanwhile, is appealing against his sentence. Though he said he was “sorry about what happened at every stage” of FTX’s rise and fall during his sentencing hearing, Kaplan said that he did not believe the former mogul showed any true remorse over his crimes.
Another FTX executive, Ryan Salame, pleaded guilty to charges that included making unlawful political contributions and received seven and a half years in prison for his part in the crimes related to the exchange. Kaplan’s sentence for Salame exceeded prosecutors’ recommendation, despite him agreeing to a plea deal that forced him to forfeit real estate and millions in fines.
Unlike Ellison and other executives, however, Salame did not act as a cooperating witness.
Two other FTX top executives, Gary Wang and Nishad Singh, are scheduled to be sentenced in the coming weeks.
