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Author: Chris Dolmetsch, Bob Van Voris, Teresa Xie, Bloomberg; Compilation: Tao Zhu, Bitchain Vision
Although Caroline Ellison assisted prosecutors in convicting her former boss and boyfriend Sam Bankman-Fried, a federal judge sentenced him to 24 months in prison.The reason is her role in the FTX collapse.
U.S. District Judge Lewis Kaplan sentenced Ellison, 29, to two years in prison Tuesday, calling Ellison’s cooperation “excellent” and praised her testimony during the fraud trial.But Kaplan noted that the case was one of the “most serious” financial fraud cases of all time, and that her cooperation could not be a “pass to jail.”
“I’ve seen a lot of collaborators over 30 years, but never seen anyone like Ms. Ellison,” Kaplan said before his sentence.He said the punishment was necessary to prevent others from doing similar behaviors because cryptocurrency fraud was “easy and attracted many criminals.”
Ellison’s verdict ends another chapter after the FTX crash, when a group of young cryptocurrency executives and friends turned against Bankman Fried and worked with prosecutors in hopes of avoiding jail.FTX filed for bankruptcy at the end of 2022, revealing a years-long fraud that prosecutors say defrauded about $10 billion from customers, investors and lenders.
Like Bankman Fried, Ellison was ordered to confiscate $11 billion in proceeds of crime.While it’s almost certain that neither of them will be able to repay the payment, such orders are not uncommon in fraud cases.In addition, she will have three years of probation after her sentence ends.
Ellison will serve his sentence on or after November 7.When the sentence was announced, she had little reaction—just looking down at the floor, while her mother and sisters seemed to shed tears at the end of the hearing, wiping them with tissues.
Friends appear in court to testify
Ellison spoke briefly in court on Tuesday and apologized to lenders, investors and victims who suffered money losses due to her actions.
“I miss the people I have hurt every day,” she said in tears. “I’m sorry I’m not brave enough.”
Ellison served as CEO of Alameda Research, a Bankman-Fried-controlled hedge fund that uses FTX client funds to make billions of dollars in venture capital.She confessed to fraud and money laundering charges.
Her punishment may herald two other key collaborators in the case later this fall, FTX co-founder Gary Wang and former engineering director Nishad Singh.Bankman-Fried was sentenced to 25 years in prison for planning FTX’s multi-billion-dollar fraud.
Shame and regret
Ellison had asked Kaplan to relieve her of her imprisonment, and U.S. probation officials advised her to undergo three years of supervised release rather than imprisonment.
“Caroline’s first reaction is not to protect herself, but to try to make things right,” her attorney Anjain Sani told the judge Tuesday, adding that her cooperation is “the cornerstone of the trial and with extraordinary silence.”The frankness and seriousness are marked by
Ellison’s lawyer argued that her cooperation was key to the government’s suing Bankman-Fried and that she immediately returned to the U.S. when the exchange collapsed in fall 2022.She then began talking to prosecutors and regulators—to admit her crimes “relentingly” while directing authorities to pay attention to illegal acts they did not know.
Tears in court
In the witness stand at the Bankman-Fried fraud trial, Ellison detailed how she worked with him to deceive lenders and clients, and their failed attempts to prevent a company from going out of business.
She testified that she prepared seven “alternative balance sheets” at Bankman-Fried’s request to cover up the fact that it borrowed about $10 billion from FTX clients and loaned about $5 billion from FTX executives and affiliated entities.
Kaplan listed it as one of the “important evidence” in the case, noting that she remembered creating the documents in an interview with prosecutors and finding relevant documents for them.
Caroline Ellison arrived in New York court on October 11, 2023.Photographer: Yuki Iwamura/Bloomberg
She also testified that she had negotiated with Bankman-Fried and other employees of FTX and Alameda, which she believes involves huge bribes to Chinese officials to allow the government to thaw Alameda’s 1 billion yuan involved in the money laundering investigationUS dollar funds.
It was one of the most dramatic moments of the trial, with Ellison crying as he described the days before FTX and Alameda’s bankruptcy in November 2022.In the quiet court, she told the court that it was the “worst week” of her life and something she had “had been afraid of for months.”That was the last time she and Bankman-Fried met.
“Model Cooperation”
Ellison met with the government more than 20 times and cautiously led investigators to investigate FTX’s fraud.Last year, Bankman Fried was found guilty of all charges after just a few hours of deliberations on the jury.He has appealed the conviction and is seeking a retrial, saying the judge has prevented him from making proper defense.
Before the hearing, prosecutors praised her cooperation on the cryptocurrency exchange investigation as “exemplary”.In their memorandum to the judge, they said they could not think of any cooperative witness in recent history “has received so much attention and harassment.”
Ellison is the daughter of a MIT economics professor and met Bankman Fried in 2015 as a summer intern at the quantitative trading company Jane Street Group.Three years later, while drinking coffee in the Bay Area, Bankman Fried convinced her to join his new cryptocurrency trading company, Alameda Research, and told her that she could make a lot of money and donate it to charities.
