Caroline Ellison, the star witness in FTX founder Sam Bankman-Fried’s fraud trial, was sentenced to 24 months in prison for her role in the collapse of the crypto exchange and its affiliated hedge fund Alameda Research.
Ellison, who admitted to participating in the fraud, cut a deal with federal prosecutors and provided testimony that put her former billionaire boyfriend and boss in prison for 25 years. She will also have to forfeit $11 billion.
“I’m sorry I wasn’t brave,” she told Judge Lewis Kaplan, crying. “Lying isn’t something that comes naturally to me.”
Ellison said since the collapse of FTX, it’s “been a relief to be completely honest and open with prosecutors and investigators.”
Kaplan applauded Ellison’s cooperation with prosecutors, saying he’d “seen a lot of cooperators in 30 years. I’ve never seen one quite like Ms. Ellison,” but added she was “by no means free of culpability.”
“You’re a very strong person, Ms. Ellison, in some ways, but not inviolable,” Kaplan said. “Mr. Bankman-Fried had your kryptonite. You were vulnerable and you were exploited.”
Assistant U.S. Attorney Danielle Sassoon also told the court Ellison deserved a lenient sentence.
“Just as important for the fairness of our justice system is when we recognize when leniency is warranted — that we distinguish between the mastermind and the willing accomplice,” Sassoon, who was one of the lead government lawyers at the trial last year, said. “In the government’s view, a lenient sentence is what is just.”
Ellison, the daughter of Massachusetts Institute of Technology economics professors, was head of FTX’s sister investment firm, Alameda Research, and played a part in one of the largest financial frauds in U.S. history. She pleaded guilty to seven fraud and money-laundering charges.
She told the court she was sorry for her actions and wanted to apologize to those she hurt and victims who lost money as a result of her actions.
“The human brain is truly bad at understanding big numbers,” she said. “Not a day goes by that I don’t think about all of the people I hurt.”
Ellison agreed to give up all the money she gained from FTX, her lawyer, Anjan Sahni, told Kaplan, adding that “she will never profit in the future for her role in this crime.”
Ellison is still cooperating with the government and some victims suing over their losses and is “doing small things to directly help people where she can,” Sahni said, calling his client “a good person” who can “still make a positive impact in the world.”
Bankman-Fried used Alameda Research as a channel through which he defrauded millions of FTX investors out of nearly $8 billion in deposits. Funds from FTX were improperly used to cover billions of dollars lost by Bankman-Fried in investments and to fuel his lavish lifestyle.
Ellison was the government’s star witness in the lengthy trial and spent nearly three days on the stand, often delivering emotional and deeply personal testimony about how Bankman-Fried mistreated her and knowingly defrauded investors. She also described, in detail, an incriminating spreadsheet that Bankman-Fried used to mislead business partners and testified in front of a packed courtroom in Manhattan that he knew what he was doing all along.
She also told the jury that she and Bankman-Fried bribed Chinese officials with $100 million to regain access to more than a billion dollars in frozen cryptocurrency so they could continue their con to cheat investors out of their money. Alameda Research had its funds frozen on Chinese crypto exchanges OKX and Huobi.
Ellison told jurors that Bankman-Fried should be held accountable for all the crimes against him that led to FTX’s implosion.
Ellison met Bankman-Fried when she was a summer intern at Jane Street, a global proprietary trading firm, in 2015. Three years later, the duo met for coffee in San Francisco, and Bankman-Fried convinced her to join Alameda Research, his new crypto trading firm.
Over the next few years, Ellison followed Bankman-Fried to Hong Kong and then to the Bahamas, where he set up his headquarters.
The two started an on-again, off-again relationship that turned problematic on several occasions. Ellison considered leaving Alameda Research, but Bankman-Fried convinced her to stay, telling her she “was essential to the survival of the business and that he loved her,” according to a presentencing memo written by her lawyers.
During the trial, Bankman-Fried’s legal team painted Ellison as a deeply insecure woman who wasn’t very good at her job, failed to follow instructions, and didn’t deserve the massive salary she pulled in.
A federal jury on Nov. 2 found Bankman-Fried, 32, guilty of seven fraud and conspiracy counts in what prosecutors called one of the biggest financial frauds in U.S. history. He was sentenced to 25 years in prison in March. The sentence marked the fall of Bankman-Fried, who went from being a billionaire and major political donor to the biggest trophy in the U.S. authorities’ case of wrongdoing in cryptocurrency markets.
Ellison was one of four former people in Bankman-Fried’s inner circle who pleaded guilty in the case. Gary Wang, FTX co-founder, and Nishad Singh, former FTX engineering chief, both testified at Bankman-Fried’s trial and will be sentenced in November and October.
Former FTX Digital Markets Co-CEO Ryan Salame, who did not cut a deal with the government, was sentenced to 7 1/2 years behind bars for making illegal campaign donations. He was also found guilty of operating an unlicensed money transmitter.
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Ellison has kept a relatively low profile while awaiting sentencing. She tried to find a job but no one would hire her, her lawyers said. Instead, she’s passed the time volunteering at a soup kitchen, fostering rescue dogs, and helping low-income families in New York with their taxes. She’s also worked with a nonprofit group that sends books to inmates and has written personal notes of encouragement to them.
“She is quiet but helpful with other people at her table, including people of all ages, identities, and backgrounds,” the book-sharing nonprofit group said, noting how Ellison never missed a shift and was always punctual.