Caroline Ellison, the former head of the trading firm that allegedly used billions of dollars of FTX customer funds for speculative activities, has been sentenced to two years in prison. This decision comes despite her cooperation with prosecutors in the case against Sam Bankman-Fried, the founder of the now-defunct cryptocurrency exchange, FTX.
U.S. District Judge Lewis Kaplan issued the sentence during a hearing in a federal court in New York on Tuesday. Ellison expressed deep remorse, addressing the court with a tearful apology to the victims. She stated, “To all the victims and everyone I harmed, I am so so sorry. I am deeply ashamed.”
Ellison’s sentence markedly contrasts with the 25-year imprisonment handed to Bankman-Fried in March, one of the longest sentences for a white-collar crime in the United States. Another former FTX executive, Ryan Salame, received a 90-month sentence in May.
FTX was a significant player in the global cryptocurrency exchange market until its collapse in November 2022. This downfall was precipitated by disclosures that Alameda Research had covertly diverted billions of dollars in customer deposits.
After FTX’s collapse, Ellison swiftly pleaded guilty to fraud and money-laundering charges and testified extensively during Bankman-Fried’s trial as the key witness. She presented evidence including spreadsheets, internal documents, and private communications that illustrated a prolonged criminal conspiracy orchestrated by Bankman-Fried.
During her testimony, Ellison disclosed that the FTX founder had instructed her and other colleagues to misappropriate around $10 billion of customer deposits for high-risk investments and loan repayments. Bankman-Fried had also directed her to create seven “alternative” balance sheets for Alameda, some of which concealed substantial kickbacks to FTX executives and masked the fact that the trading firm was “borrowing $10 billion from FTX customers.”
Ellison further testified that a version of Alameda’s accounts, which inflated the company’s asset appearance, was presented to crypto lenders including Genesis. Genesis’s lending unit eventually went bankrupt.
Prosecutors had advocated for leniency for Ellison, emphasizing her pivotal role in the government’s prosecution of Bankman-Fried, described as one of the largest financial frauds in history. They noted her significant contribution to the investigation and highlighted the intense scrutiny and harassment she faced as a cooperating witness.
Ellison, who had previously had an intermittent romantic relationship with Bankman-Fried, experienced public humiliation and had private therapy sessions disclosed in Michael Lewis’s book on the FTX collapse.
A Stanford University graduate, Ellison had met Bankman-Fried while working at the high-speed trading firm Jane Street before joining him at Alameda. She was responsible for overseeing the trading firm and had described feeling trapped within Bankman-Fried’s distorted ethical framework.
As she awaited sentencing, Ellison wrote a novella set in Edwardian England, loosely inspired by her sister Kate’s imagined romantic adventures, as disclosed by her mother in a letter to the court.
Two other former senior FTX executives, Nishad Singh and Gary Wang, who also pleaded guilty, are scheduled to be sentenced later this year.
