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Caroline Ellison, the disgraced co-CEO of Alameda Research — convicted fraudster Sam Bankman-Fried’s defunct hedge fund — will serve two years behind bars for her role in one of the biggest financial crimes in American history.
Ellison came clean about her role in the con while Bankman-Fried obstinately denied any wrongdoing, US District Judge Lewis Kaplan said Tuesday afternoon in Manhattan federal court. Describing Ellison as among the best “cooperators” he has seen in 30 years on the bench, Kaplan applauded her testimony for the prosecution as near-flawless. Yet, Kaplan intoned as he handed down his 24-month punishment, Ellison must still pay a price for her crimes.
Bankman-Fried is currently serving a 25-year sentence on his own set of federal charges related to the FTX collapse. Ellison will be allowed to do her time at a minimum-security facility, and will have to forfeit roughly $11 billion, Kaplan said.
Defense attorney Anjan Sahni opened the day’s proceedings by telling the court that getting to know Ellison over the past two years has “been a privilege,” emphasizing Ellison’s youth and acceptance of responsibility. Ellison, who Sahni said has agreed to return everything she made from FTX, told Kaplan her client should have abandoned Bankman-Fried once she realized what he was up to, but that she was unable to “leave his orbit.”
Ellison followed, stating, “I want to start by saying how sorry I am.”
“The human brain is truly bad at understanding big numbers,” she continued. “Not a day goes by that I don’t think about all of the people I hurt.”
She apologized for not having been “brave,” becoming emotional as she spoke. After living a lie for so long, Ellison said it has been “a relief to be completely open and honest” with the prosecution team.
Assistant US Attorney Danielle Sassoon spoke next, arguing in favor of a light sentence, echoing the government’s position as laid out by prosecutors in a sentencing memo filed last week. The 29-year-old was “complicit” in helping onetime boss and ex-boyfriend Bankman-Fried loot customer accounts for billions as part of a desperate effort to prop up Alameda’s sister company, crypto exchange FTX, when it imploded in 2022, the memo said. Still, they asked Kaplan for leniency when handing down Ellison’s sentence.
“Ellison’s testimony was critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing,” the sentencing memo stated. “In short, the ‘what’ and ‘how’ of the crimes, as well as the ‘why,’ would have been difficult to prove without Ellison’s testimony, and, at the very least, the Government’s evidence on these points would have been incomplete.”
Former federal prosecutor Neama Rahmani said leniency is not uncommon for defendants who provide “extraordinary cooperation,” and that judges “usually go along with the recommendation.”
“Ellison was the cornerstone of the government’s case,” Rahmani told The Independent. “She had a personal and professional relationship with Bankman-Fried, knew where the proverbial bodies were buried, and was uniquely situated to take him down.”
Ellison pleaded guilty in December 2022 to wire fraud, conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering. She has been free on bail ever since. Under federal sentencing guidelines, Ellison faced a combined total of up to 110 years behind bars. On Tuesday, Kaplan said he was required to consider standard sentencing guidelines but is not beholden to them, and that remanding Ellison to prison for more than a century would be “absurd.”
On November 16, 2022, FBI agents executed a search warrant at Ellison’s parents’ Boston-area home, where she was living at the time, and seized her phone, laptop, and personal journal. Ellison offered to turn state’s witness the same day, and began formally cooperating with prosecutors three weeks later, showing “consistent candor” from the first meeting, according to the sentencing memo.
“She accepted full responsibility from her very first proffer and did not minimize or shift blame,” the memo says. “She provided as much detail as possible about crimes that the Government was already investigating, and alerted the Government to other criminal activity too… Even before she knew what documents the Government had obtained, or what information the Government had about the creators of those documents, Ellison was forthright that she drafted some of the most incriminating documents in the case,” such as a “seven-tab spreadsheet of misleading balance sheets” used to dupe Alameda’s lenders.
The spreadsheet, labeled in court as Government Exhibit 36, was, at first glance, “impenetrable and looked nothing like a traditional financial analysis,” prosecutors explain in the sentencing memo. However, Ellison was able to decipher the document for them, providing crucial context, which gave the prosecution “proof of Bankman-Fried’s guilty intent, his knowledge, and his motive,” according to the memo. Without Ellison, it contends, coherently presenting this explosive piece of evidence to a jury “would have been impossible.”
Prosecutors wrote in the memo that Ellison’s “moral compass warped” under the sway of Bankman-Fried, who had the upper hand throughout much of their personal and professional relationship, but that she never “attempted to wield that as an excuse for her own misjudgments and wrongdoing.”
At the same time, the sentencing memo argued, “The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment.”
Bankman-Fried himself perpetuated some of the worst examples, according to the memo, such as leaking Ellison’s private writings, containing her most “personal and raw” feelings, to The New York Times in an effort to humiliate her. Ellison’s “physical appearance was scrutinized and criticized, and she was mocked in memes and other content on social media,” the memo goes on. It says her therapist divulged personal information to author Michael Lewis, who included it in his 2023 bestseller about FTX, Going Infinite.
When Ellison testified in court, Bankman-Fried “laughed, visibly shook his head, and scoffed” at her, according to the sentencing memo, which says “[n]umerous films and TV shows are in production about the downfall of FTX, which will only perpetuate the public scrutiny Ellison has faced to date.”
Since her very public fall from grace, Ellison, who dated Bankman-Fried on and off for two years, has also “drawn comfort from a new partner,” according to a 182-page sentencing memo filed September 10 by the defense. The memo cites a friend who describes Ellison’s unidentified beau as “a vast improvement” over Bankman-Fried, calling him “honest,” “intelligent,” and “empathetic.”
The thick package submitted by Ellison’s attorneys asked for zero jail time, and highlighted the probation-only sentencing recommendation from Probation and Pretrial Services. It featured letters from friends, family, and former classmates and colleagues, including one from Nobel Prize-winning economist Esther Duflo, and many played up Ellison’s deep belief in “effective altruism.” Ellison, who has been “rendered effectively unemployable in the near term” because of the FTX case, has been tutoring detainees and doing other good deeds while out on bond, defense lawyers wrote.
Co-defendant Ryan Salame, who ran a FTX subsidiary in the Bahamas, pleaded guilty last September and is now serving a 7.5-year prison sentence. Former FTX director of engineering Nishad Singh and former chief technology officer Gary Wang have also pleaded guilty and will be sentenced in October and November, respectively.
Bankman-Fried has appealed his sentence, claiming the judge overseeing the trialwas unfairly biased against him.
