District Judge Lewis A. Kaplan has sentenced former Alameda Research CEO Caroline Ellison to two years in jail.
Her role in the demise of the cryptocurrency exchange FTX and the hedge fund connected to it, Alameda Research, has played a pivotal role in one of the worst financial scandals in American history.
Ellison collaborated with federal authorities in the prosecution against Sam Bankman-Fried, the founder of FTX, who received a 25-year jail sentence after entering a guilty plea to fraud charges.
Ellison’s attorneys highlighted her considerable cooperation with the inquiry and asked for a time-served sentence and supervised release in a court filing earlier this month.
” I’ve seen a lot of cooperations in thirty years. I’ve never seen one quite like Ms. Ellison,” Judge Kaplan remarked in court on September 24 according to Bloomberg.
Kaplan also concluded that Ellison must give up roughly $11 billion. Ellison’s lawyers contended that her help was essential to getting Bankman-convicted Fried and getting FTX consumers’ lost assets back.
According to her legal team, she doesn’t represent a risk to public safety, and she shouldn’t be sentenced to more time behind bars.
“Caroline should have left,” Ellison’s lawyer, Anjan Sahni, said in court, per Bloomberg. She “could not bring herself to leave Bankman-Fried’s orbit… Caroline’s first instincts weren’t to protect herself, but to try to make things right”
In order to solve the FTX incident, which involved billions of dollars in improperly taken client monies, Ellison’s participation was essential.
“Since the collapse of FTX, it’s been a relief to be completely honest and open with prosecutors and investigators,” Ellison said in court on Sept. 24, per Bloomberg.
Judge Kaplan’s decision still attributed a great deal of responsibility to Ellison in spite of this collaboration. With charges of fraud and poor management leveled at Alameda Research and the exchange, FTX failed in November 2022.
Legal professionals and the larger cryptocurrency community have expressed interest in Ellison’s situation. Traders conjectured on websites such as Polymarket as to whether she would escape jail time.
Who is Caroline Ellison?
Caroline Ellison was a major factor in the demise of FTX and its related companies. She participated in dubious financial activities as co-CEO of Alameda, including the purported misappropriation of FTX client monies to pay off Alameda’s debts.
Ellison acknowledged being a part of a plot to embezzle billions of dollars from FTX customers to finance dangerous investments, pay off Alameda Research’s losses, and give FTX executives personal loans.
The New York Times revealed in July that Ellison wrote down her ideas in confidential Google docs, expressing concerns about her suitability to oversee the fund, a significant portion of Bankman-Fried’s operations. For a while, Ellison also dated Bankman-Fried.
“She didn’t shy away from the details, however embarrassing they were,” a lawyer said about Ellison’s details of her relationship with Bankman-Fried, per Bloomberg.
As previously established, Ellison aided the prosecution during the trials and provided testimony against Bankman-Fried to spare himself a possible 110-year prison term.
Her evidence, which described the financial theft and dishonest business activities at FTX, was crucial to the case’s outcome.
“I cannot overstate the importance of Ellsion’s testimony in convicting Bankman-Fried,” Assistant US Attorney Danielle Sassoon said in the Sept. 24 courtroom, per Bloomberg, “Ellison’s cooperation, which together with the trial evidence, proved Bankman-Fried’s criminal knowledge and intent.”
Other FTX Sentences
Earlier this year, Ryan Salame, a former CEO of FTX, was given a 7.5-year prison sentence for his involvement in an illegal political influence campaign and running an unregistered money-transmitting enterprise.
Prosecutors highlighted his role in compromising public confidence in elections and financial integrity, even desmpite his legal team’s plea for a reduced sentence.
