Banker Fried’s ex-girlfriend Ellison gets two years in prison for crypto fraud

ARCHIVE PHOTO: Former cryptocurrency executive Caroline Ellison was sentenced to two years in prison on Tuesday. | Photo credit: Reuters

Former cryptocurrency executive Caroline Ellison was sentenced to two years in prison on Tuesday for her role in the theft of $8 billion in client funds from the now-bankrupt FTX exchange he founded by her ex-boyfriend Sam Bankman-Fried. However, the judge also acknowledged her extensive cooperation with prosecutors.

U.S. District Judge Lewis Kaplan said during a sentencing hearing in Manhattan federal court that he was uncomfortable with the idea that remorse and cooperation would be a “get out of jail free card” in a case so serious. Prosecutors have called Bankman-Fried’s actions one of the largest financial frauds in U.S. history.

Also read: Explained | The Implications of FTX and What’s Next for Crypto?

Ellison, 29, pleaded guilty to seven counts of fraud and conspiracy and testified as a prosecution witness in the trial of Bankman-Fried, who was convicted last year on fraud and other charges and is serving a 25-year prison sentence over the 2022 collapse of FTX.

The crimes she pleaded guilty to carried a maximum sentence of 110 years in prison. Her lawyers had argued that she should not receive a prison sentence because of her cooperation. Prosecutors also asked for leniency.

Kaplan told Ellison that she was “gravely guilty of this fraud,” though he said her “remarkable cooperation” was a “fundamental difference” between her and Bankman-Fried.

“There’s no way you’re ever going to do something like that again, I’m convinced of that,” the judge told Ellison. “But here’s the thing: This was, if not the single greatest financial fraud ever committed in this country or anywhere else, it was close.”

Ellison crossed her hands in her lap and looked at the defense table after the sentence was read. She spoke to Kaplan earlier, speaking rapidly and reading from a prepared statement.

“There’s not a day that goes by that I don’t think about all the people I’ve hurt,” said Ellison, a Stanford University graduate whose parents and two sisters were in court. “My mind can’t even really grasp the magnitude of the damage I’ve caused. That doesn’t mean I don’t try.”

Ellison led Alameda Research, a cryptocurrency-focused hedge fund that Bankman-Fried founded, from 2021-2022. Ellison said she often thought about leaving Alameda.

“Every time I thought about it, I heard Sam’s voice in my head,” Ellison told the judge. “Ignoring that voice in my head and speaking out would have been brave,” Ellison said, breaking into sobs and sniffles. “I’m sorry I wasn’t brave.”

Without proposing a specific punishment, the Manhattan District Attorney’s Office, which filed the charges, urged Kaplan not to overly punish Ellison.

“I cannot overstate the importance of Ms. Ellison’s testimony in convicting Sam Bankman-Fried,” prosecutor Danielle Sassoon told the hearing.

Prosecutors say Ellison met with them about 20 times to unravel FTX’s case and argue their case against Bankman-Fried.

“Unlike Bankman-Fried, she is not cunning. There is no evidence that she was driven by greed, or that a thirst for risk or power was part of her nature,” Sassoon said.

‘A POWERFUL MESSAGE’

Anjan Sahni, Ellison’s attorney, told the judge that sparing Ellison a prison sentence “would send a powerful message about the value of timely, honest and full cooperation with the government in cases of financial crime.”

“She didn’t shy away from the details, no matter how embarrassing they were,” said Sahni, who added that Ellison’s “honesty and openness” were critical to the charges.

Kaplan said he would recommend that Ellison be held in a minimum-security prison and begin serving her sentence in November. Ellison could be eligible for release, a few months short of two years, if she is rewarded for good behavior in prison.

Nishad Singh and Gary Wang, two other former FTX executives who cooperated with prosecutors, are expected to be sentenced on October 30 and November 20, respectively.

Bankman-Fried, 32, has profited from the explosive growth in cryptocurrency prices during the COVID pandemic and had a net worth of $26 billion as of October 2021, according to Forbes magazine. He has gained fame as a generous donor to charities and Democratic politicians.

His fortune evaporated when FTX collapsed in November 2022 amid a flood of customer withdrawals. Bankman-Fried was charged a month later with stealing FTX customer funds to cover losses at Alameda. Ellison pleaded guilty in December 2022.

Ellison testified for three days at Bankman-Fried’s trial, saying he directed her and others to take money from FTX’s customers without their knowledge. Bankman-Fried is appealing his conviction and sentence.