Bankman-Fried’s Ex-Girlfriend Ellison Sentenced to Two Years for Crypto Fraud, Reports Reuters

By Luc Cohen

NEW YORK (Reuters) – Caroline Ellison, a former cryptocurrency executive, was sentenced to two years in prison on Tuesday for her involvement in the theft of $8 billion in customer funds tied to the now-defunct FTX exchange, which was founded by her former boyfriend, Sam Bankman-Fried. The judge acknowledged Ellison’s significant cooperation with prosecutors during the proceedings.

U.S. District Judge Lewis Kaplan expressed discomfort with the notion of remorse and cooperation acting as a "get out of jail free card" in such a serious case, labeling Bankman-Fried’s actions as potentially one of the largest financial frauds in U.S. history.

At 29 years old, Ellison pleaded guilty to seven felony counts of fraud and conspiracy last year and served as a key witness in Bankman-Fried’s trial, where he was found guilty of multiple charges related to FTX’s collapse and is currently serving a 25-year prison sentence.

Despite the maximum sentence associated with her charges being 110 years, Ellison’s defense team asked for no prison time, citing her cooperation, which prosecutors supported as well.

Judge Kaplan indicated that while Ellison was deeply involved in the fraud, her "remarkable cooperation" set her apart from Bankman-Fried. "There’s no way you’re ever going to do something like this again, I am persuaded," he told her. However, he underscored the gravity of the financial fraud she was involved in, stating it was among the most serious ever committed.

During the hearing, Ellison appeared visibly upset, clasping her hands in her lap. She expressed her ongoing remorse, saying, "Not a day goes by when I don’t think about all the people I hurt." She mentioned that her understanding of the harm caused was overwhelming, and reflected on her struggles to leave Alameda Research, the hedge fund Bankman-Fried founded, during her tenure from 2021-2022.

Ellison shared her internal conflict, recalling how Bankman-Fried’s voice echoed in her mind whenever she considered leaving the firm. "Ignoring that voice and speaking out would have been brave," she stated, fighting back tears. "I’m sorry I wasn’t brave."

While the U.S. Attorney’s office did not recommend a specific sentence, they emphasized the crucial role Ellison’s testimony played in securing a conviction against Bankman-Fried. Prosecutor Danielle Sassoon noted that Ellison met with prosecutors approximately 20 times to help build their case.

"Unlike Bankman-Fried, she is not cunning… there is no evidence she was driven by greed," Sassoon argued.

Anjan Sahni, Ellison’s attorney, echoed those sentiments, arguing that sparing Ellison from prison time would send a powerful message about the importance of cooperation in financial crime cases. He commended her willingness to provide full disclosure, regardless of the embarrassing details.

Judge Kaplan recommended that Ellison serve her sentence in a minimum-security facility, with her incarceration set to begin in November. She may qualify for early release for good behavior, potentially serving just under two years.

Other former FTX executives, including Nishad Singh and Gary Wang, who also cooperated with prosecutors, are facing their own sentencing dates soon.

Bankman-Fried, who saw his net worth skyrocket to $26 billion during the COVID pandemic, notably became a prominent donor to various philanthropic causes and Democratic politicians. However, his wealth diminished rapidly when FTX collapsed in November 2022 amid a surge of customer withdrawals. He was indicted the following month for misappropriating customer funds to cover losses at Alameda. Ellison entered her guilty plea in December 2022.

During the trial, Ellison testified for three days about Bankman-Fried’s directive to misuse FTX customer funds without their consent. Bankman-Fried is currently appealing his conviction.