Former romantic partner Caroline Ellison, now a key prosecution witness against convicted cryptocurrency con artist Sam Bankman-Fried, was handed a two-year prison sentence for her role in the approximately $16 billion FTX Ponzi scheme.
Carlton Ellison served as Chief Executive Officer of Alameda Research, the proprietary trading firm within FTX, a leading cryptocurrency derivatives exchange founded by Sam Bankman-Fried.
The investigation revealed that Alameda had misappropriated customer funds invested in FTX and used them to purchase shares, as well as cover personal expenses of a lavish nature.
The 30-year-old defendant pleaded guilty to seven charges related to the crypto fraud in late 2022, including wire fraud and money laundering, as part of a plea agreement that required her cooperation.
The 2-year prison sentence was handed down despite recommendations from Ellison’s legal team and the Federal Probation Division advocating for a more lenient outcome: three years of supervised release with no incarceration time?
At sentencing, Judge Lewis Kaplan recognized the significant assistance Ellison had provided to authorities, yet still refused to issue a “get out of jail free” pass in its literal sense.
Despite facing a potential maximum sentence of over 110 years, Ellison was ultimately sentenced to just 24 months in prison.
The sentence is a significantly reduced one compared to that imposed on Sam Bankman-Fried earlier this year, with the former FTX CEO currently serving a 25-year prison term.
Sam Bankman-Fried was sentenced to a maximum of 25 years in prison. Picture: YouTube
‘Exemplary’ cooperation
FTX’s cryptocurrency trading platform skyrocketed in value to reach an astonishing $46 billion (approximately $32 billion USD).
In the aftermath of the 2022 crypto crash, a mass withdrawal of customer funds from FTX triggered an investigation that uncovered a staggering misuse of funds. It was found that FTX and Alameda had allegedly utilized billions of dollars intended for customers to fuel their own trading activities and support the extravagant personal expenditures of executives.
Only a month following FTX’s Chapter 11 filing, Sam Bankman-Fried, also known as SBF, reached a plea agreement with authorities in December 2022.
The notice revealed her testimony in favor of Bankman-Fried, providing prosecutors with seven fabricated spreadsheets allegedly created by FTX, a significant piece of evidence in the case.
Ellison pleaded guilty to the fraud charges, but claimed that she was directed and controlled by Bankman-Fried.
“He was my direct supervisor,” she reiterated firmly during her testimony.
“He was my direct supervisor, having control over my salary and possessing the authority to terminate my employment at will.”
The prosecution characterized Ellison’s cooperation throughout the trial as “unwavering and exemplary.”
“The prosecution argued that nowhere else in American history has a cooperating witness received such extreme attention and persecution as in this case.”
The judge presiding over the sentencing hearing also acknowledged her assistance.
“In three decades, I’ve witnessed numerous individuals willing to cooperate.”
“I’ve never encountered anyone quite as remarkable as Ms. Ellison.”
According to the lawyer for Sam Bankman-Fried’s ex-girlfriend, Caroline Ellison, his former representative claimed that after reflecting on her involvement with FTX and Alameda Research, she felt she had rediscovered her moral bearings and deeply regretted not having withdrawn from both entities sooner.
Despite the initial assumption that she was not directly involved, the investigation ultimately revealed that the decision-maker had still played a significant role in perpetuating the fraud at FTX and Alameda, making imprisonment a necessary consequence.
Accordingly, she has been directed to relinquish approximately $16 billion of her assets (approximately $11 billion USD), effective immediately.
Ellison delivered a concise statement regarding the sentencing, acknowledging her role in the cryptocurrency fraud and expressing regret for her involvement.
Companion turned testifier
Ellison’s personal life remained tumultuous, as he continued to navigate an on-again, off-again romance with Bankman-Fried while both men were concurrently involved in running their respective entities, Alameda and FTX.
As Sam Bankman-Fried’s trial approached, he brazenly leaked Samuelson’s confidential notes to the media, ultimately prompting authorities to revoke Ellison’s bail.
Leaked writings from a Google Doc revealed that Ellison expressed doubts about her ability to effectively govern Alameda, citing a lack of confidence in her qualifications. The documents also shed light on the personal dynamics between Ellison and Bankman-Fried, highlighting the nature of their romantic relationship.
The founder of Alameda Research, Sam Bankman-Fried, maintained that Caroline Ellison, a key figure in the FTX saga, was responsible for fraudulent activities. Picture: X.com
Following a highly publicized month-long trial, the jury reached a swift verdict within just four hours, finding Samuel Bankman-Fried guilty of seven charges including fraud, conspiracy, and money laundering.
According to US lawyer Damian Williams, the cryptocurrency founder is accused of orchestrating a massive, multi-billion-dollar fraud scheme with the aim of self-aggrandizement, seeking to be hailed as the “King of Crypto”.
Counsel for Bankman-Fried had sought to portray the disappearance of billions of dollars in customer funds from FTX’s balance sheet as a result of incompetence rather than deliberate malice, with the funds being diverted to Alameda for investments and used by Bankman-Fried to support his extravagant lifestyle.
The prosecutor leading the case characterized the FTX fraud as “unrefined embezzlement” masquerading as innovative technology underpinnings.
Bankman-Fried is seeking a retrial for his ongoing criminal case, requesting a fresh start with a new judge at the helm.
Former FTX executive Ryan Salame has been handed a prison sentence of seven and a half years for his role in the fraud, exceeding the length sought by prosecutors.
Salame struck a plea deal but failed to fulfill his obligation as a cooperating witness during the Bankman-Fried trial.
Two senior FTX executives face sentencing in the near future.
