FTX collapse: Caroline Ellison handed 2-year prison sentence for fraud

A former top executive in Sam Bankman-Fried’s fallen FTX cryptocurrency empire was sentenced to two years in prison on Tuesday for the part she played in a fraud that stole billions of US dollars from investors, lenders, and customers.

Caroline Ellison, 29, could have faced a much tougher sentence, but both the judge and prosecutors said she deserved credit for talking extensively with federal investigators, pleading guilty, and ultimately testifying against Bankman-Fried for three days at his trial last November.

US District Judge Lewis A Kaplan said Ellison’s cooperation was “very, very substantial” and “remarkable”.

But he said a prison sentence was necessary because she had participated in what might be the “greatest financial fraud ever perpetrated in this country and probably anywhere else” or at least close to it.

Ellison was ordered to report to prison November 7.

‘I’m deeply shame of what I’ve done’ – Ellison

FTX was one of the world’s most popular cryptocurrency exchanges, known for its Superbowl TV ad and extensive lobbying campaign in Washington DC, before it collapsed in 2022.

US prosecutors accused Bankman-Fried and other top executives of looting customer accounts on the exchange to make risky investments, make millions of dollars of illegal political donations, bribe Chinese officials, and buy luxury real estate in the Caribbean.

Ellison was chief executive at Alameda Research, a cryptocurrency hedge fund controlled by Bankman-Fried.

“I’m deeply ashamed with what I’ve done,” she said at the sentencing hearing, fighting through tears to say she was “so so sorry” to everyone she had harmed directly or indirectly.

She did not speak as she left Manhattan federal court in New York, surrounded by lawyers.

In court on Tuesday, Assistant US Attorney Danielle Sassoon called for leniency, saying Ellison’s testimony was “devastating and powerful proof” against Bankman-Fried, 32, who was found guilty of fraud and sentenced to 25 years in prison.

Attorney Anjan Sahni asked the judge to spare his client from prison, citing “unusual circumstances,” including her off-and-on romantic relationship with Bankman-Fried and the damage caused when her “whole professional and personal life came to revolve” around him.

Judge Kaplan agreed that Ellison’s willingness to work with prosecutors was extraordinary.

“I’ve seen a lot of cooperators in 30 years here. I’ve never seen one quite like Ms Ellison,” he said.

But he said that in such a serious case, he could not let cooperation be a get-out-of-jail-free card, even when it was clear that Bankman-Fried had become “your kryptonite”.

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Bankman-Fried ‘evasive, even contemptuous’

Bankman-Fried also testified at the trial, portraying himself to the jury as inexperienced and bumbling but not a criminal.

He acknowledged making mistakes, but said he didn’t defraud anyone and wasn’t aware that Alameda Research had amassed billions of dollars in debt.

Sassoon, the prosecutor, described that testimony in court on Tuesday as “evasive, even contemptuous”.

As the business began to falter, Ellison divulged the massive fraud to employees who worked for her even before FTX filed for bankruptcy, trial evidence showed.

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Ultimately, she also spoke extensively with criminal and civil US investigators.

Sassoon said prosecutors were impressed that Ellison did not “jump into the lifeboat” to escape her crimes but instead spent nearly two years fully cooperating.

Since testifying at Bankman-Fried’s trial, Ellison has engaged in extensive charity work, written a novel, and worked with her parents on a math enrichment textbook for advanced high school students, according to her lawyers.

They said she also now has a healthy romantic relationship and has reconnected with high school friends she had lost touch with while she worked for and sometimes dated Bankman-Fried from 2017 until late 2022.

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