Search Articles
MANHATTAN (CN) — A New York federal judge on Tuesday afternoon sentenced former FTX-linked executive Caroline Ellison to two years in prison for her role in defrauding $8 billion from cryptocurrency trading customers.
At trial, Ellison delivered critical trial testimony against former crypto-billionaire Sam Bankman-Fried.
“What she said on the stand was very incriminating against herself, and she pulled no punches about any of it,” U.S. District Judge Lewis Kaplan said of Ellison’s robust cooperation with prosecutors.
The Clinton-appointed judge contrasted her sincere contrition and candor contrasted against the evasive denials of Bankman-Fried, who is serving out a 25-year sentence for his role in the fraud.
“Your remorse is the real thing, and that was evident when you were on the witness stand, but it truly became evident a lot earlier," Kaplan said at the sentencing hearing in Manhattan federal court.
While the judge swooned over Ellison’s cooperation against the mastermind of the FTX fraud, he ultimately found that it could not wholesale overcome her own involvement in the company’s scheme. “For it to be a case this serious, to be literally a get-out-of-jail-free card is something I cannot see a way to,” Kaplan said.
Ellison will serve her 24-month sentence at a minimum security prison.
The 29-year-old Standford graduate wore a black blazer over a burnt mauve-colored dress at the sentencing hearing. Her parents, both MIT economists, and her two younger sisters held hands in the front of the courtroom gallery behind the defense desk, as the sentence was imposed.
“It’s been almost two years since the collapse of FTX and not a day goes by that I don’t think about all the people that I’ve hurt,” she said, beginning to sniffle as she apologized to victims of the FTX fraud. “I’m so, so sorry. I can’t even begin to imagine the pain I caused all of you.”
Ellison — whose star witness testimony at that trial was the “cornerstone” of the government’s case against Bankman-Fried, according to the prosecution’s sentencing memo — requested a non-custodial sentence of supervised release for her “enormously credible and important” cooperation.
“Because Caroline had been truthful since she first disclosed these crimes in November 2022, Mr. Bankman-Fried’s counsel was unable to impeach her on cross-examination,” her attorneys wrote in her sentencing submission. “Her testimony was so devastating to Mr. Bankman-Fried that substantial portions of the government’s closing argument and this court’s comments at Mr. Bankman-Fried’s sentencing quoted Caroline extensively.”
Ellison, who was the CEO of the Alameda Research cryptocurrency-trading hedge fund founded by Bankman-Fried, reached a cooperation deal with federal prosecutors one month after Bankman-Fried’s FTX cryptocurrency exchange filed for bankruptcy following the crypto equivalent of a bank run of customer withdrawals in November 2022.
Bankman-Fried was ultimately convicted of fraudulently plundering customers’ money by directing Alameda to illegally commingle billions of dollars of FTX customers’ deposited funds as loans for cryptocurrency futures trading on the digital asset trading exchange he co-founded and controlled.
Ellison, facing a maximum sentence of up 110 years in prison, pleaded guilty to all counts of a superseding indictment in secret in December 2022.
She accepted lifetime bans in the industry by the Securities and Exchange Commission and the Commodity Futures Trading Commission, and also surrendered any media story rights related to her crimes, her attorney Anjan Sahni said Tuesday.
The probation department recommended that Ellison be sentenced to time served with a period of supervised release.
Federal prosecutors from the Southern District of New York concurred with the department’s pre-sentence report finding that a noncustodial punishment, in light of her valuable and timely cooperation, “would be sufficient, but not greater than necessary to fulfill the objectives of sentencing.”
“Ellison’s testimony was critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing,” prosecutors wrote in their sentencing memo. “In short, the ‘what’ and ‘how’ of the crimes, as well as the ‘why,’ would have been difficult to prove without Ellison’s testimony, and, at the very least, the Government’s evidence on these points would have been incomplete.”
Assistant U.S. Attorney Danielle Sassoon said she couldn’t overstate the importance of Ellison’s cooperation testimony and document review in convicting Bankman-Fried.
Ellison testified that Bankman-Fried had promoted her from Alameda trader to co-CEO in the summer of 2021, while the pair were broken up in between on-again, off-again periods of dating.
“He directed me to commit these crimes,” she said during her first day on the witness stand last October.
The following month, the New York jury deliberated for just four hours before returning guilty verdicts against Bankman-Fried on all counts.
Follow @jruss_jrussSubscribe to our free newsletters
Our weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.