Ex-Alameda CEO Caroline Ellison sentenced to two years in prison for FTX fraud role

Mila September 24, 2024

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Key Takeaways

Ellison gets 2-year sentence for FTX fraud role, cooperation cited in leniency
Judge Kaplan said SBF was Ellison’s ‘kryptonite’

Caroline Ellison, the former CEO of Alameda Research, was sentenced to 24 months in prison Tuesday by a Manhattan court for her role in the multibillion-dollar FTX crypto exchange fraud. Judge Lewis Kaplan, who previously handed Sam Bankman-Fried a 25-year sentence, acknowledged Ellison’s cooperation but emphasized the severity of the crimes committed.

Ellison had pleaded guilty to seven charges related to the collapse of FTX in late 2022, admitting to conspiring with Bankman-Fried to misappropriate billions in customer deposits. Despite entering a plea agreement with the US Department of Justice and providing full cooperation, the court determined that the extent of the fraud warranted incarceration.

“I’ve seen a lot of cooperators in 30 years. I’ve never seen one quite like Ms. Ellison,” Kaplan said, later adding that Ellison was “vulnerable” and “exploited” during the ordeal.

Her testimony proved instrumental in Bankman-Fried’s November 2023 trial, offering critical evidence that led to his conviction on all seven counts of fraud. In April 2024, Bankman-Fried received a 25-year prison sentence for orchestrating the scheme.

Ellison’s defense team had sought leniency, requesting three years of supervised release without prison time. They highlighted her acceptance of responsibility, deep remorse, and portrayal as a figure under Bankman-Fried’s influence. The lawyers described Ellison as living in a social “bubble” centered around her former partner, noting her repeated attempts to leave Alameda.

Despite the federal Probation Department’s recommendation of no prison time and prosecutors’ support for leniency, Judge Kaplan ruled that the magnitude of the fraud necessitated a custodial sentence. The judge stated that while Ellison’s cooperation was commendable, it did not absolve her of accountability for her actions in the years-long scheme.

As Ellison begins her prison term, her former associate is challenging his conviction. Bankman-Fried’s lawyers filed an appeal earlier this month, alleging bias from the trial judge. They argue that limitations on presenting evidence and mounting an effective defense led to an unfair trial.

The appeal claims the judge’s rulings prevented Bankman-Fried from arguing that FTX users might recover funds through bankruptcy proceedings, creating a false narrative of permanent losses. His legal team seeks to overturn the conviction and requests new proceedings under a different judge.