FTX fraudster Caroline Ellison sentenced to 2 years in prison, ordered to pay $11 billion

Caroline Ellison, former CEO of Alameda Research and key witness in the case against FTX founder Sam Bankman-Fried, was sentenced on Tuesday in New York federal court to two years in prison. She was also ordered to forfeit $11 billion for her role in the massive fraud and conspiracy that led to the downfall of FTX, once valued at $32 billion.

Ellison’s testimony played a crucial part in the conviction of Bankman-Fried, her former boyfriend. Her sentencing comes two years after she pleaded guilty to fraud charges linked to her leadership roles at FTX and Alameda.

Judge Lewis Kaplan acknowledged Ellison’s “very, very substantial cooperation” in the case. Showing little emotion during the hearing, Ellison expressed her regret, saying:

“I think on some level my brain can’t even truly comprehend the scale of the harm it caused. That doesn’t mean I don’t try. I am so, so sorry.” With her voice cracking, she added, “I am deeply ashamed of what we had done.”

Her family, including her parents and two sisters, were present during the sentencing.

Despite the federal Probation Department’s recommendation of three years of supervised release with no prison time and a similar request from her defense team, Ellison received a two-year sentence. Alameda had received a large portion of the $8 billion in customer funds that Bankman-Fried diverted from FTX to support Alameda’s trading operations and other ventures.

FTX, once a highly-touted startup backed by celebrities, allowed users to buy and sell digital assets. It imploded in November 2022 when customers withdrew funds in response to rumors about FTX’s close ties to Alameda.

Ellison, who was at the helm of Alameda, admitted guilt on seven federal counts of fraud and conspiracy shortly after the collapse. She was one of several insiders who turned against Bankman-Fried, identifying him as the mastermind behind the scheme to defraud investors and steal $8 billion from FTX customer accounts.

Bankman-Fried, who pleaded not guilty, was convicted and sentenced to 25 years in prison, although he has since filed an appeal. Ellison’s testimony during his trial was a pivotal factor in the outcome.

Prosecutors, in a memo to Judge Kaplan, commended Ellison’s transparency and “substantial assistance” during the investigation, which played a role in her lighter sentence compared to Bankman-Fried, despite facing similar charges.

Before FTX’s collapse, Ellison served as co-CEO of Alameda Research, while Gary Wang, another key figure, was FTX’s Chief Technology Officer. FTX, founded by Bankman-Fried and Wang in 2019, grew from a little-known startup into a major player in the crypto world, rivaling giants like Coinbase and Binance. Its sudden downfall left thousands of investors blindsided, with billions lost.