Lucía Peña
Caroline Ellison, former co-CEO of Alameda Research, was sentenced to two years in prison on Tuesday for her involvement in the collapse of cryptocurrency exchange FTX, which resulted in billions of dollars in losses for consumers. Ellison, who was once in a relationship with FTX’s former CEO Sam Bankman-Fried, had pleaded guilty in December 2022 to charges including conspiracy and fraud.
Ellison’s charges included two counts of conspiracy to commit wire fraud, two counts of wire fraud, and additional charges related to commodities, securities fraud, and money laundering. Alameda Research, closely tied to FTX, was also founded by Bankman-Fried. As part of her sentence, Ellison is required to forfeit approximately $11 billion and will serve time in a minimum-security facility, according to Bloomberg.
In court, Ellison expressed remorse, apologizing to those impacted by her actions. “Not a day goes by that I don’t think about all of the people I hurt,” she said, according to Bloomberg. Her testimony against Bankman-Fried during his criminal trial played a significant role in her case. She revealed that Bankman-Fried instructed her to commit illegal activities that contributed to FTX’s downfall. Ellison testified that Alameda had access to customer funds via an unlimited credit line and direct access to deposits sent to a specific bank account labeled “fiat@.”
Ellison also disclosed during the trial that she had falsified balance sheets to make Alameda’s financial standing appear less risky, under Bankman-Fried’s guidance. Judge Lewis Kaplan, who presided over both her sentencing and Bankman-Fried’s, noted that Ellison cooperated with authorities while Bankman-Fried “denied the whole thing,” according to Bloomberg.
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Ellison’s legal team had previously requested leniency, citing her cooperation with authorities. The federal Probation Department had recommended a sentence of time served along with three years of supervised release. Braden Perry, a former federal enforcement attorney, commented that her cooperation was likely a major factor in the recommendation for a lighter sentence. However, Perry emphasized that the judge could still choose to impose a harsher sentence if deemed necessary.
The collapse of FTX resulted in widespread public distrust, and there is pressure to hold those responsible accountable. While cooperation is valued, the scale of the losses may prompt stricter punishment, Perry added.
Samson Enzer, a partner at Cahill, Gordon & Reindel, suggested that Judge Kaplan would likely impose a lighter sentence on Ellison to encourage others to cooperate with government investigations in the future. He noted that Kaplan had given Bankman-Fried a 25-year sentence to deter similar crimes but might be inclined to show leniency to Ellison due to her cooperation.
Other former FTX executives, including Gary Wang and Nishad Singh, have also faced charges and cooperated with authorities. Wang’s sentencing is scheduled for November 20, while Singh’s is set for October 30. Bankman-Fried was sentenced to nearly 25 years in prison and ordered to repay up to $11 billion in losses earlier this year.
