Caroline Ellison, the star witness in the prosecution of her former boyfriend, FTX founder Sam Bankman-Fried, was sentenced Tuesday in New York federal court to two years in prison and ordered to forfeit $11 billion for her role in the massive fraud and conspiracy that doomed the cryptocurrency exchange once valued at $32 billion.
The prison term was significantly stiffer than the recommendation by the federal Probation Department that Judge Lewis Kaplan sentence Ellison, who had run the hedge fund Alameda Research, to three years of supervised release, with no time at all behind bars. Defense lawyers also had requested a no-prison sentence for Ellison.
Alameda received much of the $8 billion in customer funds looted by Bankman-Fried from FTX. The stolen money was used for Alameda’s trading operation and other purposes.
Caroline Ellison, former CEO of Alameda Research LLC, right, arrives at court in New York on Sept. 24, 2024.
Michael Nagle | Bloomberg | Getty Images
While Kaplan praised Ellison for her extensive cooperation with prosecutors — which led to the conviction of Bankman-Fried — the judge said her criminal sentence needed to deter other potential bad actors from committing fraud.
The judge said the FTX case is probably the greatest financial fraud perpetrated in the history of the U.S., and because of that a “literal get-out-of-jail-free card I can’t agree to,” Kaplan said in U.S. District Court in Manhattan, where Ellison’s parents and two sisters looked on from the courtroom’s gallery.
“I’ve seen a lot of cooperators over the years and I’ve never seen one quite like Miss Ellison,” said Kaplan, who also said he believed that Ellison was genuinely remorseful for her crimes and that her cooperation carried a steep price for her emotionally.
Assistant U.S. Attorney Danielle Sassoon urged Kaplan for leniency, citing Ellison’s consistent truthfulness while refusing to minimize her role in the fraud. Sassoon also said she could not overstate Ellison’s assistance in convicting Bankman-Fried.
Ellison’s attorney, Anjan Sahni, urged Kaplan to give Ellison a second chance saying she has “recovered her moral compass” and “profoundly regrets” not leaving FTX and Bankman-Fried’s orbit.
Caroline Ellison, former chief executive officer of Alameda Research LLC, at podium giving her sentencing statement in court in New York, US, on September 24, 2024.
Courtesy: Elizabeth Williams
Ellison read from a statement in a shaky voice while crying at times as she apologized to the people she had hurt and said she was deeply ashamed. She also said she was sorry for not being brave enough to walk away from FTX and Bankman-Fried.
Kaplan allowed Ellison to remain free on bail until she surrenders to prison either on or after Nov. 7.
Ellison reached a plea deal with prosecutors in December 2022, a month after FTX spiraled into bankruptcy. She pleaded guilty to conspiracy and financial fraud charges.
Bankman-Fried, in contrast, chose to stand trial and was convicted of all seven criminal fraud charges against him. He was sentenced to 25 years in prison in March and also was ordered to pay $11 billion in forfeiture by Kaplan.
Bankman-Fried since then has appealed his conviction, and requested a new trial and a different judge, arguing that Kaplan was biased against him.
Two other former FTX executives, Gary Wang and Nishad Singh, are scheduled to be sentenced later this year. Like Ellison, they pleaded guilty instead of standing trial.
On Tuesday, before sentencing Ellison, Kaplan noted that while the FTX founder had denied criminal conduct, she cooperated with authorities.
Former cryptocurrency executive Caroline Ellison stands before U.S. District Judge Lewis Kaplan, during a hearing where she was sentenced to two years in prison for her role in her former boyfriend Sam Bankman-Fried’s theft of $8 billion in customer funds from the now-bankrupt FTX exchange he founded, at Federal Court in New York City, U.S., September 24, 2024 in this courtroom sketch.
Jane Rosenberg | Reuters
“It didn’t work out so well” for Bankman-Fried, in part because of Ellison’s cooperation, the judge said.
Kaplan credited Ellison for providing prosecutors with seven fake spreadsheets, which he called “one of the huge pieces of evidence in the case” against Bankman-Fried.
Late Monday, Ellison’s attorneys in a court filing said they had finalized financial settlements with prosecutors and the FTX debtor’s estate.
The filing did not say how much she would pay in those settlements, which are separate from the forfeiture order, but it was already known that Ellison’s $10 million in shares in the AI startup Anthropic, which have grown substantially since she first bought them, provide the bulk value of her settlements.
Both Bankman-Fried and Ellison had faced the same statutory maximum sentence of about 110 years in prison for their crimes.
Defendants in criminal cases who cooperate with prosecutors instead of fighting the charges, particularly in white-collar cases such as FTX, often receive leniency when they are sentenced.
WATCH: FTX founder Sam Bankman-Fried appeals fraud conviction
