Caroline Ellison Sentenced to Two Years in Prison

By Luc Cohen

NEW YORK (Reuters) – Former cryptocurrency executive Caroline Ellison was sentenced on Tuesday 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, even as the judge recognized her extensive cooperation with prosecutors.

U.S. District Judge Lewis Kaplan remarked during a sentencing hearing in Manhattan federal court that he was not comfortable with remorse and cooperation being a "get out of jail free card" in such a serious case. Prosecutors labeled Bankman-Fried's actions as one of the biggest financial frauds in U.S. history.

Ellison, 29, pleaded guilty to seven felony counts of fraud and conspiracy and testified as a prosecution witness in Bankman-Fried's trial, who is serving a 25-year prison sentence following his conviction related to FTX's 2022 collapse.

The crimes she pleaded guilty to carried a maximum sentence of 110 years. Her lawyers advocated for no prison time due to her cooperation, which prosecutors also supported.

Judge Kaplan told Ellison she was "gravely culpable in this fraud," but noted her "remarkable cooperation" marked a significant difference between her and Bankman-Fried.

> "There's no way you're ever going to do something like this again, I am persuaded," the judge addressed her. "But here's the thing: this was, if not the very greatest financial fraud ever perpetrated in this country or anywhere else, close to it."

Ellison, visibly emotional, addressed the court, stating, "Not a day goes by when I don't think about all the people I hurt." A Stanford University graduate, Ellison reflected on her time running Alameda Research, a hedge fund founded by Bankman-Fried. She mentioned feeling conflicted about staying with Alameda but often heard his voice in her head, discouraging her from leaving.

Without signaling a specific sentence, the U.S. Attorney's office in Manhattan encouraged the judge to be lenient with Ellison. Prosecutor Danielle Sassoon remarked on the importance of Ellison's testimony in convicting Bankman-Fried.

> "Unlike Bankman-Fried, she is not cunning. There is no evidence she was driven by greed, or that an appetite for risk or power was part of her nature," Sassoon stated.

Ellison's attorney argued that sparing her prison time would convey a powerful message about the value of honest cooperation in financial crime cases. Kaplan indicated he would recommend Ellison serve her sentence in a minimum-security prison, starting in November, with potential early release for good behavior.

Nishad Singh and Gary Wang, two other former FTX executives who also cooperated, are scheduled for sentencing on October 30 and November 20, respectively.

Bankman-Fried's wealth skyrocketed to $26 billion at one point, but vanished following FTX's collapse in November 2022. He was charged a month later with defrauding FTX customer funds. Ellison admitted guilt in December 2022, later testifying against Bankman-Fried, who is appealing his conviction and sentence.