Caroline Ellison sentenced to 2 years for role in FTX crypto fraud

Caroline Ellison, former CEO of Alameda Research, was sentenced to two years in prison by District Judge Lewis A. Kaplan.

His role in the collapse of cryptocurrency exchange FTX and its affiliated investment fund Alameda Research was at the center of one of the biggest financial scandals in U.S. history.

Ellison pleaded guilty to fraud charges and cooperated with federal authorities in the case against FTX founder Sam Bankman-Fried; Bankman-Fried was sentenced to 25 years in prison.

Ellison’s attorneys filed a motion with the court earlier this month asking for a prison sentence and probation, emphasizing Ellison’s extensive cooperation with the investigation.

“I’ve seen many conspirators over my 30 years. I’ve never seen anyone like Ms. Ellison,” Judge Kaplan said in court on Sept. 24, according to Bloomberg. Kaplan also concluded that Ellison should forfeit about $11 billion.

Ellison’s lawyers argued that his assistance was vital in securing Bankman-Fried’s conviction and recovering assets lost by FTX customers. His legal team stressed that he poses no risk to public safety and should not receive additional prison time.

“Caroline had to go,” Ellison’s attorney Anjan Sahni told the court, according to Bloomberg. “She couldn’t bring herself to leave Bankman-Fried’s orbit… Caroline’s first instinct was not to protect herself, but to try to make things right.”

Ellison’s cooperation was key in unraveling the FTX scandal, which involved the embezzlement of billions of dollars in customer funds.

“It has been a relief to be completely honest and open with prosecutors and investigators since the collapse of FTX,” Ellison said in court on September 24, according to Bloomberg.

Despite this cooperation, Judge Kaplan placed significant blame on Ellison, as seen in his decision.

FTX collapsed in November 2022 amid accusations of fraud and mismanagement directed at both the exchange and Alameda Research.

Ellison’s fate has caught the attention of both legal experts and the broader crypto community, with traders on platforms like Polymarket speculating whether he would escape prison time.

Who is Caroline Ellison?

Caroline Ellison played a key role in the collapse of FTX and its subsidiaries. As co-CEO of Alameda, she engaged in questionable financial practices, including the alleged misuse of FTX customer funds to meet Alameda’s liabilities. Ellison admitted to participating in a scheme to misuse billions of dollars in FTX customer funds to cover Alameda Research losses, finance risky investments, and provide personal loans to FTX executives.

The New York Times reported in July that Ellison had written into private Google documents expressing doubts about Bankman-Fried’s suitability to manage the fund, a key part of his job.

Ellison was also in a relationship with Bankman-Fried for a time.

“He didn’t shy away from the details, no matter how embarrassing,” one lawyer said of Ellison’s relationship with Bankman-Fried, according to Bloomberg.

As previously noted, Ellison cooperated with prosecutors throughout the trials and testified against Bankman-Fried to avoid a possible 110-year prison sentence. His testimony, detailing the misuse of funds and deceptive practices at FTX, played a key role in the case.

“I cannot emphasize enough the importance of Ellison’s testimony in convicting Bankman-Fried,” Assistant U.S. Attorney Danielle Sassoon said at the Sept. 24 hearing, according to Bloomberg. “Ellison’s cooperation, along with the trial evidence, proved Bankman-Fried’s criminal knowledge and intent.”

Other FTX sentences

Earlier this year, a former FTX executive, Ryan Salame, was sentenced to 7.5 years in prison for his role in an illegal political influence campaign and operating an unlicensed money transmitting business.

Despite his legal team’s call for a lighter sentence, prosecutors highlighted his role in undermining public trust in elections and fiscal integrity.