Both the prosecution and the defense argued that Caroline Ellison should be sentenced to time served — without her, the extent of Sam Bankman-Fried’s crimes might never have been revealed.
Caroline Ellison was a key member of Sam Bankman-Fried’s inner circle, and became a star witness against him during a high-stakes trial last year.
Ellison was the former CEO of Alameda Research, the sister trading firm to FTX, which collapsed in 2022 after a multi-billion dollar black hole emerged in the exchange’s finances.
A devastating investigation later revealed that FTX client funds had been used to make risky bets without the clients’ knowledge, with Alameda given a secret “back door” that allowed the hedge fund to withdraw seemingly endless amounts of money.
Although she could have faced up to 110 years behind bars, her early guilty plea made it unlikely she would spend the rest of her life in prison — and in a rare turn of events, both the prosecution and defense are asking for her to be sentenced to time served.
In a Manhattan courtroom Tuesday, Ellison apologized to everyone who lost money at FTX. “Not a day goes by,” she said, without thinking about the harm done to so many innocent victims.
“The human mind is really bad at understanding big numbers. I was involved in a criminal conspiracy that ultimately resulted in the theft of billions of dollars from people who entrusted us with their money.”
Ellison
in sympathetic note In a memo to Judge Lewis Kaplan, prosecutors praised her “exceptional cooperation with the government” and said that should be reflected in her sentence. The memo concluded:
“The government cannot think of another cooperating witness in recent history who has received more attention and harassment. The professional consequences of this level of publicity are clear and unlikely to be short-lived. Yet throughout, and certainly during her testimony, Ellison remained steadfast in her candor and dedication to telling the truth—despite the embarrassment she often felt—and to helping bring the most guilty party to justice.
At the hearing, the judge declared that Ellison was “deeply self-incriminating,” consistent with her testimony, and that a 110-year sentence would be “absurd.”
But the judge concluded that she was “by no means free from guilt” and sentenced her to two years in prison.
Why did prosecutors praise Ellison?
In the face of Bankman-Fried’s “systematic destruction of evidence,” prosecutors alleged that Ellison provided “credible and detailed information” about her significant role in his crimes, allowing them to build a clearer picture of his wrongdoing.
Ellison was also noted to have warned SBF against aggressive borrowing for Alameda, predicting that the company may eventually have to use FTX funds if the market turns.
“As FTX collapsed, Bankman-Fried insisted on publicly denying her knowledge and wrongdoing. Ellison, on the other hand, expressed relief that the fraud had been exposed and that she was responsible for her wrongdoing,” prosecutors wrote in their sentencing statements. The judge agreed that she cooperated fully, while Bankman-Fried was “the opposite.”
After weaving her way through a massive crowd of photographers during the three days she testified, Ellison spoke about her on-again, off-again relationship with SBF, directly accused him of crimes, and alleged that his unkempt appearance was a deliberate attempt to boost FTX’s image.
Her testimony played a pivotal role in Bankman-Fried’s conviction and 25-year prison sentence for defrauding clients and investors. He is currently appealing his sentence.
Prosecutors noted that many of the charges would have been difficult to prove without her assistance, adding: “The timing of Ellison’s cooperation contributed to the speed with which the government was able to charge Bankman-Fried, ensuring that he did not flee the Bahamas or further impede the government’s investigation.”
While some argue that Ellison’s sentence is overly lenient, prosecutors say she will face consequences for years to come.
They pointed out that Bankman-Fried leaked her private writings to The New York Times In an attempt to undermine her testimony – and the minute details she shared with the therapist ended up coming out in go to infinity By Michael Lewis. The prosecutors wrote last week:
Her physical appearance has been scrutinized and criticized, and she has been mocked in memes and other content on social media. There are several films and TV shows in production about the fall of FTX, which will only perpetuate the public scrutiny Ellison has faced so far… and the professional consequences of that level of fame are clear.
Ellison’s Attorney Added Their client “will carry shame and remorse to her grave” — and Benckman-Fried had a direct role in distorting her moral compass.
Anjan Sahni noted that she was also affected when FTX suddenly halted withdrawals and slipped into bankruptcy, as the “vast majority of my savings” were on the platform.
“She will never benefit from her role in this crime,” Sahni added.
Ellison, who turns 30 in November, is portrayed as someone focused on rebuilding her life by volunteering and writing a math textbook. She is unlikely to keep any of the profits she made at Alameda Research. Her legal team wrote:
Caroline’s involvement in the criminal conspiracies at the Alameda Research Center is a major departure from her law-abiding nature. She poses no risk of recidivism. Sending Caroline to prison is not necessary, either to deter her personally or to protect the public. Caroline is unlikely to reoffend because she did not commit these crimes out of greed.
The seriousness of Ellison’s crimes and her role in harming the financial health of countless FTX customers cannot be understated. But in the eyes of both the prosecution and the defense, she was also crucial to resolving the chaos that followed.
After nearly two years, 98% of those who were entitled to funds from this cursed exchange have received their full initial investment – plus an additional 18% in compensation.
The outcome could have been very different had Ellison not cooperated so closely – a fact reflected in her sentence.
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