Caroline Ellison, whose testimony helped convict her former boss and ex-lover, notorious cryptocurrency mogul Sam Bankman Freed, was sentenced to two years in prison on Tuesday for fraud and conspiracy.
Ellison was sentenced to 24 months in prison and ordered to forfeit $11 billion by U.S. District Judge Lewis A. Kaplan in Manhattan for his role in the collapse of Bankman Freed’s cryptocurrency trading firm FTX. Ellison had faced a maximum sentence of approximately 110 years in prison.
Ellison, 29, accepted a plea deal on charges of conspiracy and financial fraud in December 2022, one month after FTX fell into bankruptcy. She testified for nearly three days at Bankman Freed’s trial last November.
Bankman Freed was convicted of seven counts of fraud and sentenced to 25 years in prison, and prosecutors said in court documents that her testimony was “central to the trial.”
Ellison’s lawyers had asked that she serve her sentence and be placed on probation due to her cooperation. In court documents filed earlier this month, her lawyers said she promptly returned to the U.S. from FTX’s headquarters in the Bahamas in 2022 and voluntarily cooperated with the U.S. Attorney’s Office.
According to the documents, Ellison actively cooperated with financial regulators to help them understand what went wrong at FTX and Alameda Research, a sister hedge fund to FTX that Ellison also ran.
According to federal prosecutors, Alameda Research used an unlimited line of credit from FTX to receive much of the $8 billion in FTX client funds looted by Bankman Freed, which Freed then used for personal expenses, trading, repaying Alameda’s debt, and making political contributions, Ellison and other witnesses allege.
Lawyer Anjan Sahni, who sought extra time in prison, said Ellison had “restored his moral compass” and “deeply regretted” not being able to free himself from Bankman Freed’s control.
Ellison read a statement in court in which he apologized to those he hurt and expressed shame for his role in the unrest.
However, Kaplan said that FTX’s collapse may be the largest financial fraud in U.S. history, and that he disagrees with giving the defendants “literal immunity.”
He ordered her to turn herself in to authorities after November 7.
In a 67-page court document filed Sept. 10, CEO John Ray, who has been guiding the crypto company FTX through bankruptcy proceedings, said Ellison’s cooperation with the government was “valuable” in helping the team preserve and protect “hundreds of millions of dollars” in assets.
Her lawyers wrote that Bankman-Freed forced her into a kind of isolation that “warped” her morality. They said that at his direction, Ellison helped “steal billions of dollars” while “living in fear, knowing that a catastrophic breakdown was likely, and fearing that stepping out would only hasten that breakdown.” Her working relationship with Bankman-Freed was further complicated by the two’s on-and-off romantic relationship.
Ellison’s lawyers said Bankman Freed persuaded Ellison to stay on by telling him he loved her and that she was essential to the company’s survival, but “at the same time, perversely, indicated that he did not consider her worthy of appearing in public with him at high-profile events.”
Before its collapse in 2022, FTX was one of the world’s most popular cryptocurrency exchanges and was known for its extensive lobbying in Washington and Super Bowl commercials.
Bankman Freed and other executives were accused of looting funds from the exchange’s client accounts, making risky investments, buying luxury real estate in the Caribbean, making millions of dollars in illegal political contributions and bribing Chinese officials.
Former Bankman Freed executive Ryan Salameh was the first of the FTX executives to be sentenced. In May, a judge sentenced him to seven years and six months in prison and ordered him to pay more than $6 million in forfeiture and more than $5 million in restitution.
Two other former executives, Nishad Singh and Gary Wang, are scheduled to be sentenced in October and November respectively.
