Caroline Ellison, his former girlfriend and star witness in the prosecution of FTX founder Sam Bankman Freed, was sentenced to two years in prison and ordered to forfeit $11 billion in New York federal court on Tuesday for her role in a massive fraud and conspiracy that brought down the cryptocurrency exchange once worth $32 billion.
The prison term was much tougher than the one recommended by the Federal Probation Office, which recommended that Judge Lewis Kaplan sentence Ellison, who ran the hedge fund Alameda Research, to three years of probation with no prison time. The defense also did not seek a prison sentence for Ellison.
Alameda received the majority of the $8 billion in client funds that Bankman Freed stole from FTX, and used the stolen money for Alameda’s trading operations and for other purposes.
Caroline Ellison (right), former CEO of Alameda Research LLC, arrives at a New York courthouse on Sept. 24, 2024.
Michael Nagel | Bloomberg | Getty Images
Judge Kaplan praised Ellison’s extensive cooperation with prosecutors that led to Bankman Freed’s conviction, but said Ellison’s punishment must deter other potentially bad actors from committing the fraud.
The judge said in U.S. District Court in Manhattan that the FTX case is perhaps the largest financial fraud in U.S. history and that he therefore “cannot agree to a literal exoneration.” Ellison’s parents and two sisters watched the trial from the gallery.
“I’ve seen a lot of collaborators over the years, but I’ve never seen anyone like Mr. Ellison,” Kaplan said, adding that he believed Mr. Ellison was truly remorseful for his crimes and that his collaboration had come at a heavy emotional cost.
Assistant U.S. Attorney Daniel Sassoon called for leniency for Kaplan, citing Ellison’s consistent integrity and refusing to downplay her role in the fraud. Sassoon also said Ellison’s cooperation in convicting Bankman Freed could not be overstated.
Ellison’s lawyer, Anjan Sahni, said Ellison has “restored his sense of morality” and “deeply regrets” his failure to extricate himself from FTX and Bankman Freed’s control, and urged Kaplan to give Ellison another chance.
Caroline Ellison, former CEO of Alameda Research LLC, stands at a podium delivering her verdict in a courtroom in New York, USA, on September 24, 2024.
By: Elizabeth Williams
Ellison, reading the statement in a trembling voice and at times in tears, said he apologized to those he hurt, was deeply ashamed, and regretted not having the courage to step aside from FTX and Bankman Freed.
Judge Kaplan allowed Ellison to be held on bail until he surrenders to prison after November 7th.
Ellison is A plea deal with the prosecution will be made in December 2022.This was a month after FTX filed for bankruptcy. She pleaded guilty He faces charges of conspiracy and financial fraud.
In contrast, Bankman Freed chose to go to trial and was convicted of seven counts of fraud. He was sentenced to 25 years in prison in March and ordered to pay $11 billion in forfeiture money from Kaplan.
Bankman Freed subsequently appealed his conviction, requesting a new trial and being tried by a different judge, arguing that Kaplan was biased against him.
Two other former FTX executives, Gary Wang and Nishad Singh, are also due to be sentenced later this year. Like Ellison, they pleaded guilty instead of going to trial.
Before sentencing Ellison on Tuesday, Kaplan noted that the FTX founder denies any criminal wrongdoing but is cooperating with authorities.
Former cryptocurrency executive Caroline Ellison stands before U.S. District Judge Lewis Kaplan during a hearing to determine her two-year sentence for her role in the theft of $8 billion in customer funds from the now-bankrupt FTX exchange, founded by her ex-boyfriend Sam Bankman Freed. A courtroom sketch in federal court in New York City on Sept. 24, 2024.
Jane Rosenberg | Reuters
The judge said things “didn’t go so well” for Bankman Freed in part because of Ellison’s cooperation.
Kaplan praised Ellison for providing the prosecution with seven fake spreadsheets, calling them “one of the big pieces of evidence in the case” against Bankman Freed.
Late Monday, Ellison’s lawyers said in a court filing that a financial settlement had been reached between prosecutors and the heirs of FTX debtors.
The filing does not specify how much Ellison will pay as a settlement separate from the forfeiture order, but it is already known that the bulk of the settlement will consist of $10 million in shares in Anthropic, an AI startup whose stock has risen significantly since Ellison first bought it.
Both Bankman Freed and Ellison faced the same statutory maximum sentence of approximately 110 years in prison for their respective crimes.
Criminal defendants, especially in white-collar crime cases like FTX’s, often receive leniency at sentencing if they cooperate with prosecutors rather than contest the charges.
clock: FTX Founder Sam Bankman Freed Appeals Fraud Charges
