A judge sentenced former cryptocurrency executive Caroline Ellison to two years in prison on Tuesday for her role in helping her former boyfriend, Sam Bankman-Fried, steal $8 billion in customer funds from the bankrupt FTX exchange.
Despite her extensive cooperation with prosecutors, U.S. District Judge Lewis Kaplan emphasized the seriousness of the case. He expressed discomfort with the idea that her remorse and cooperation could act as a “get out of jail free card.”
During the sentencing in Manhattan federal court, Kaplan highlighted the gravity of the case, describing Bankman-Fried’s actions as one of the biggest financial frauds in U.S. history. Ellison, 29, had previously pleaded guilty to seven felony counts of fraud and conspiracy and testified as a prosecution witness in Bankman-Fried’s trial. Bankman-Fried, convicted of fraud and other charges last year, is now serving a 25-year prison sentence following FTX’s collapse in 2022.
Ellison faced charges that could have resulted in up to 110 years in prison. Her lawyers argued for no prison time due to her cooperation, and prosecutors also sought leniency. However, Kaplan told Ellison that she held significant responsibility in the fraud, even though her cooperation set her apart from Bankman-Fried. “You will never do something like this again, I am persuaded,” Kaplan said, but added, “This was one of the greatest financial frauds ever.”
After hearing her sentence, Ellison crossed her hands on her lap and looked down. Earlier, she addressed Kaplan, reading from a prepared statement at a rapid pace. “Not a day goes by when I don’t think about all the people I hurt,” said Ellison, a Stanford University graduate. Her parents and two sisters attended the hearing. She continued, “My brain can’t fully grasp the scale of the harm I’ve caused. That doesn’t mean I don’t try.”
Ellison had managed Alameda Research, a cryptocurrency-focused hedge fund founded by Bankman-Fried, between 2021 and 2022. She admitted that she had considered leaving Alameda many times but felt trapped by Bankman-Fried’s influence. “Every time I thought about it, I heard Sam’s voice in my head,” Ellison confessed. “Ignoring that voice and speaking out would have been brave. I’m sorry I wasn’t brave.”
Without recommending a specific sentence, the U.S. Attorney’s office in Manhattan urged the judge to show leniency toward Ellison. Prosecutor Danielle Sassoon highlighted the significance of Ellison’s testimony, which played a crucial role in convicting Bankman-Fried. Prosecutors revealed that Ellison met with them around 20 times to help reconstruct the events leading to FTX’s downfall and strengthen their case against Bankman-Fried. Sassoon noted, “Unlike Bankman-Fried, she is not cunning. There is no evidence she acted out of greed, or that an appetite for risk or power drove her actions.”
Ellison’s lawyer, Anjan Sahni, argued that sparing her from prison would send a powerful message about the importance of cooperating with the government in financial crime cases. He emphasized that Ellison never shied away from revealing embarrassing details, and her “honesty and openness” were essential to the prosecution.
Kaplan said he would recommend Ellison serve her sentence in a minimum-security prison and begin her term in November. With good behavior, she may be eligible for release slightly earlier than two years. Meanwhile, two other former FTX executives who cooperated with prosecutors, Nishad Singh and Gary Wang, will face sentencing on October 30 and November 20, respectively.
Bankman-Fried, 32, had amassed a net worth of $26 billion by October 2021, riding the cryptocurrency boom during the COVID-19 pandemic. He became known for his philanthropic donations and support of Democratic politicians. However, his fortune disappeared when FTX collapsed in November 2022 amid a surge in customer withdrawals. Authorities charged Bankman-Fried the following month with stealing FTX customer funds to cover Alameda’s losses.
Ellison had pleaded guilty in December 2022 and testified that Bankman-Fried instructed her and others to take funds from FTX’s customers without their knowledge. Bankman-Fried is currently appealing his conviction and sentence.
