Caroline Ellison receives 2 year prison sentence for FTX fraud

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Caroline Ellison, the former head of the trading firm through which FTX gambled billions of dollars in client funds, has been sentenced to two years in prison despite helping prosecutors in the criminal case against Sam Bankman-Fried, the founder of the stock exchange Crashed Cryptocurrencies.

Judge Lewis Kaplan imposed the sentence during a hearing in federal court in New York on Tuesday. “To all the victims and all those I have harmed. . . I’m so sorry,” a tearful Ellison said before Kaplan’s decision. “I am deeply ashamed.”

The sentence for Ellison, who ran the FTX-affiliated trading fund Alameda Research, stands in stark contrast to the 25-year prison sentence handed down to Bankman-Fried in March, which is among the longest sentences in the US for a white-collar criminal. Another former FTX executive, Ryan Salame, received a 90-month prison sentence in May.

FTX was one of the world’s largest cryptocurrency exchanges when it collapsed in November 2022 following revelations that Alameda had secretly siphoned off billions of dollars in customer deposits.

Ellison, who quickly pleaded guilty to fraud and money laundering charges shortly after FTX’s implosion, testified for several days at Bankman-Fried’s trial, where she was the star witness.

She led the jury through spreadsheets, internal documents and private Signal chats that painted a picture of a years-long criminal conspiracy by a crypto-billionaire.

While on the stand, Ellison revealed that the FTX founder ordered her and her former colleagues to steal approximately $10 billion in customer deposits from the stock exchange to fund risky investments and repay loans.

She said Bankman-Fried directed her to create seven “alternative” balance sheets for Alameda, some of which masked billions of dollars in fees to FTX executives, and she was ordered to cover how the trading group was “borrowing $10 billion of dollars from FTX customers”. “.

A version of Alameda’s accounts that made its “assets look bigger” was offered to crypto lenders, including Genesis, which was seeking loans amid a sharp downturn in the sector, Ellison testified. Genesis’ lending unit later went bankrupt.

Prosecutors asked for leniency for Ellison, 29. In a letter to Kaplan ahead of the hearing, they pointed out that Ellison “was instrumental in the government’s successful prosecution of Samuel Bankman-Fried for one of the largest financial frauds in history” and provided “substantial investigative assistance” .

They added that Ellison, who was previously in an “on-again, off-again” romantic relationship with Bankman-Fried, was humiliated in the media as a result of her testimony and had private conversations with a therapist disclosed in Michael’s book Lewis. on the FTX collapse.

“The government cannot think of another cooperating witness in recent history who has received a greater level of scrutiny and harassment,” they wrote.

A graduate of Stanford University, Ellison met Bankman-Fried at the high-speed trading company Jane Street before leaving to join Alameda with him. She was in charge of running the trading firm and had described feeling trapped and drawn into Bankman-Fried’s warped moral worldview.

While awaiting sentencing, Ellison wrote a novella “set in Edwardian England and loosely based on the imagined amorous exploits of her sister Kate,” the former director’s mother revealed in a letter to the court.

Two other former senior FTX executives who also pleaded guilty, Nishad Singh and Gary Wang, are due to be sentenced later this year.