Caroline Ellison was sentenced to 24 months in prison on Tuesday for covering up Sam Bankman-Fried’s rampant fraud at FTX, which resulted in billions of dollars in customer losses.
Bloomberg reported that Ellison began his sentencing hearing live by telling the judge he was “deeply sorry” for covering up FTX’s lies.
“I was involved in a criminal conspiracy to steal billions of dollars from people who entrusted us with their money,” Ellison reportedly said, sniffling. “The human brain is really bad at understanding big numbers,” she added, adding that “not a day goes by that I don’t think about all the people I’ve hurt.”
Assistant U.S. Attorney Daniel Sassoon followed Ellison’s lead, saying the government recommended a lighter sentence because it was important for the court to “distinguish between the mastermind and the willing co-conspirator.” (Bankman-Fried was sentenced to 25 years.)
U.S. District Judge Lewis Kaplan noted that he could give Ellison a lenient sentence for providing “substantial assistance to the government.” He then noted that he always thought the maximum sentence she received of 110 years was “outrageous,” given Ellison’s inconsistent testimony and her full cooperation with the government throughout the FTX investigation.
“I’ve had a lot of collaborators over the past 30 years,” Kaplan said. “I’ve never seen anyone like Mr. Ellison.”
But while Ellison was brave enough to tell the truth about his crimes, Kaplan said Ellison was “by no means innocent.” He called Bankman-Fried “kryptonite” because the FTX co-founder took advantage of “a very powerful person” so easily. Bloomberg reported that Ellison was sentenced to two years in prison and ordered to forfeit about $11 billion, noting that no one gets a “get out of jail free card.”
Bloomberg reported that the judge said Ellison “could serve his sentence in a minimum security facility.”
Ellison played a key role in SBF’s rapid rise to prominence.
As the former CEO of Alameda Research, a cryptocurrency trading firm linked to the FTX exchange, Ellison could have been sentenced to up to 110 years in prison for misleading clients and investors. However, after providing devastating and detailed testimony that exposed Bankman-Fried’s numerous lies, the probation office recommended a sentence of three years of supervised release.
Kaplan’s sentence is likely to be more severe, with other co-conspirators who cooperated with the government investigation also likely to face prison sentences.
Both Ellison and the U.S. government requested significant leniency, citing her “critical” cooperation as the reason the U.S. was able to convict Bankman-Fried in record time in such a complex criminal case.
Because Ellison had a romantic relationship with Bankman-Fried and because she “produced some of the most incriminating documents in this case,” U.S. Attorney Damien Williams wrote in a letter to Kaplan that she “played a key role in the government’s successful prosecution of Samuel Bankman-Fried, one of the largest financial frauds in history.”
Williams explained that Ellison did everything she could to help the government investigate Bankman-Fried’s fraud. About a month after FTX declared bankruptcy, Ellison began cooperating with the U.S. government’s investigation. She met with prosecutors about 20 times and dug through thousands of documents to identify and interpret key evidence that helped convict her former boss and boyfriend.
Ellison’s sentencing memo states that “analyzing Alameda Research’s poor internal records was complicated by vague titles and unlabeled calculations on all documents reflecting the misuse of client funds.” If she had not testified for three days at trial, the jury would not have understood “Alameda’s intentionally unclear records.” Williams also said that because Bankman-Fried systematically destroyed evidence, she was one of the few witnesses who could refute Bankman-Fried’s lies, provided a timeline of how Bankman-Fried’s scheme unfolded, and was willing to find receipts to back it all up.
“As the nominal CEO of Alameda and Bankman-Fried’s ex-girlfriend, Ellison was uniquely positioned to explain not only the what and how of Bankman-Fried’s crimes, but also why,” Williams wrote. “Ellison’s testimony was critical to prosecuting and convicting Bankman-Fried and to understanding the timeline of the fraud scheme and the multiple layers of wrongdoing.”
While Bankman-Fried also attempted to argue that FTX’s collapse was caused by “well-intentioned but incompetent” behavior, Ellison admitted his guilt before law enforcement got involved and then went on to express “genuine shame and remorse” for the harm he caused, Williams wrote.
Ellison’s sentencing memorandum suggested a lighter sentence would “incentivize those involved in the fraud to publicly expose the fraud as Caroline did, to take immediate accountability, and to promptly cooperate with civil and criminal authorities.”
Williams praised Ellison for being exceptionally proactive, even warning the government about criminal activity it didn’t yet know about. He also praised her for persisting as a truth-teller “despite intense media and public scrutiny and Bankman-Fried’s public efforts to discredit and intimidate her by weaponizing her private writings.”
“The government cannot think of a cooperating witness in recent history who has been subjected to more attention and harassment,” Williams wrote.
Ellison’s attorneys argued in their sentencing that Ellison had been sufficiently punished and asked for no prison sentence. Not only would she not recover “anything” from the FTX bankruptcy proceedings she was helping to settle, she would be barred from working in the only industry she has ever worked in, and she would be unlikely to repeat her crimes in the financial and crypto sectors. She would also be barred from operating any publicly traded company, and “the notoriety this case has given her has rendered her effectively unemployed for a short period of time.”
“The damage to her reputation is unlikely to subside any time soon,” Ellison’s sentencing memorandum read. “These personal, financial and professional consequences constitute a substantial form of punishment that lessens the need for the court to order her incarceration.”
Kaplan explicitly opposed this, sentencing her to 24 months in prison and ordering her to forfeit $11 billion.
