In a significant development in the FTX fraud case, Caroline Ellison, the former girlfriend and top executive of convicted cryptocurrency fraudster Sam Bankman-Fried, was sentenced to two years in prison on Tuesday. The ruling by U.S. District Judge Lewis Kaplan in Manhattan federal court marks the latest chapter in the downfall of FTX, once a leading cryptocurrency exchange that collapsed amid allegations of widespread fraud.
Ellison, 29, had pleaded guilty to multiple fraud charges in December 2022 and agreed to cooperate with prosecutors in their case against Bankman-Fried. As the head of Alameda Research, a sister company of FTX, Ellison played a pivotal role in the misappropriation of billions of dollars in customer funds from the exchange. Her extensive cooperation with investigators led to Bankman-Fried’s conviction on multiple counts of fraud and conspiracy earlier this year.
During Bankman-Fried’s trial, Ellison provided damning testimony against her former lover, detailing his role in orchestrating the fraud and the steps she took under his direction to steal from FTX customers. Her testimony was crucial in securing Bankman-Fried’s conviction and subsequent 25-year prison sentence.
At Tuesday’s hearing, Judge Kaplan praised Ellison’s “remarkable” cooperation but emphasized that a prison sentence was necessary to deter future financial crimes. “While you were gravely culpable in this fraud, there is no doubt that you had remarkable cooperation,” Kaplan said. “That’s a fundamental distinction between you and Mr. Bankman-Fried.”
Ellison, who fought back tears throughout the hearing, apologized to the victims of the FTX fraud. “To all the victims and everyone I harmed directly and indirectly, I am so, so sorry,” she said. “I can’t even imagine the pain I caused.” She added that she was “deeply ashamed” of her actions and regretted not leaving FTX and Bankman-Fried’s orbit sooner.
Prosecutors had urged Kaplan to impose a lenient sentence on Ellison, citing her “substantial assistance” in the investigation. However, the judge said he could not grant her a “get out of jail free card” despite her remorse and cooperation. “This is one of the greatest financial frauds ever perpetrated in this country and probably anywhere else,” Kaplan said.
In addition to her prison sentence, Ellison was ordered to forfeit $11 billion, reflecting the massive scale of the fraud she helped perpetrate. After serving her prison term, she will be subject to three years of supervised release.
Ellison’s sentencing comes as the FTX case continues to unfold, with other former executives facing legal consequences for their roles in the fraud. Two other former FTX executives, Gary Wang and Nishad Singh, who also pleaded guilty and testified against Bankman-Fried, are scheduled to be sentenced later this year.
The FTX saga has sent shockwaves through the cryptocurrency industry, raising concerns about regulatory oversight and the need for greater transparency in the sector. Bankman-Fried’s fall from grace has been a cautionary tale for those seeking to build and operate in the fast-growing but largely unregulated world of cryptocurrencies.