Caroline Ellison, the former CEO of Alameda Research and key witness in the prosecution of her ex-partner Sam Bankman-Fried (SBF), was sentenced to two years in prison on Tuesday for her part in the FTX fraud.
The sentencing took place on Tuesday in a New York federal court, where Judge Lewis Kaplan also ordered Ellison to forfeit $11 billion for her role in the massive fraud that led to the downfall of FTX, once valued at $32 billion.
FTX Collapse Claims Another Inmate
According to a CNBC report, the two-year prison term was notably harsher than the recommendation from the federal Probation Department, which had suggested a sentence of three years of supervised release without incarceration. Ellison’s defense team had also requested no prison time, arguing for leniency based on her cooperation with authorities.
Ellison’s firm, Alameda Research, received a significant portion of the estimated $8 billion in customer funds misappropriated by Bankman-Fried from FTX. These funds were allegedly used for Alameda’s trading operations and other ventures.
During the sentencing, Judge Kaplan praised Ellison for her cooperation with the prosecution, which played a crucial role in Bankman-Fried’s conviction. However, he emphasized the need for a sentence that would deter potential fraudsters, stating, This case is probably the greatest financial fraud perpetrated in the history of the US.
The judge reportedly acknowledged Ellison’s emotional struggles throughout the proceedings. He remarked on her unique cooperation, noting, “I’ve seen a lot of cooperators over the years, and I’ve never seen one quite like Miss Ellison.”
Assistant US Attorney Danielle Sassoon advocated for a lighter sentence, highlighting Ellison’s truthful testimony and significant assistance in securing Bankman-Fried’s conviction earlier this year.
Free On Bail Until November 7
In her statement to Judge Kaplan in court, Ellison expressed remorse and said she was “deeply ashamed and apologized” to those affected by her actions. She admitted that she had failed to leave the “toxic environment” of FTX and Bankman-Fried, which she now regretted.
Judge Kaplan has allowed Ellison to remain free on bail until her scheduled surrender date on or after November 7. She had previously reached a plea deal with prosecutors in December 2022, pleading guilty to conspiracy and financial fraud charges following FTX’s bankruptcy.
In contrast, Sam Bankman-Fried opted for a trial and was found guilty on all seven counts against him, receiving a 25-year prison sentence in March 2024 along with an $11 billion forfeiture order. Bankman-Fried has since appealed his conviction, alleging bias from Judge Kaplan.
Additionally, two former FTX executives, Gary Wang and Nishad Singh, are awaiting sentencing later this year after also pleading guilty. Their cooperation, similar to Ellison’s, may influence the leniency of their sentences.
At the time of writing, the exchange’s native token, FTT, was trading at $1.425, up 5% and 12% over the 24-hour and seven-day periods, respectively, amid the broader market rally.
Featured image from DALL-E, chart from TradingView.com