Caroline Ellison Sentenced to 2 Years in Prison for Role in FTX Fraud Scandal

Caroline Ellison former CEO of Alameda Research founded by Sam Bankman-Fried goes into a wrong car as she exits the Manhattan federal court after testifying in New York on Oct. 10, 2023. Eduardo Munoz Alvarez/AP Photo

NEW YORK—Former crypto executive Caroline Ellison, a key witness in the fraud and conspiracy case involving the Sam Bankman-Fried-led FTX platform, has been sentenced to two years in prison and ordered to forfeit around $11 billion for her role in the scandal.

On Sept. 24, U.S. District Judge Lewis Kaplan handed down the sentence to Ellison, who was the co-chief executive of Alameda Research, FTX’s companion hedge fund operated by Bankman-Fried, her former boyfriend.

Kaplan sentenced Ellison to 24 months in prison, along with three years of supervised release. He also ordered her to forfeit around $11 billion in assets.

Ellison pleaded guilty in 2022 to seven counts—including wire fraud and conspiracy to commit securities fraud—in connection with the collapse of FTX, one of the largest financial frauds in history.

Facing the prospect of up to 110 years behind bars, Ellison cooperated with prosecutors and was a key witness during the trial against Bankman-Fried, who was earlier found guilty of defrauding FTX customers out of some $8 billion and sentenced to 25 years in prison.

In court on Friday, Ellison expressed contrition for her actions, saying she wanted to apologize to investors, lenders, and victims who lost money as a result of her actions.

“I think often how my brain can’t truly comprehend the scale of the harm I’ve caused,” Ellison said, reading her statement through tears.

“I’m deeply ashamed with what I’ve done.”

During Bankman-Fried’s trial, Ellison testified that funds from FTX investors were improperly used to cover billions of dollars lost by Bankman-Fried in investments or squandered on charity donations, political contributions, and purchases that fueled his high-flying lifestyle.

Kaplan said Ellison’s cooperation with prosecutors in the case was “very, very substantial.”

Ellison, 29, pleaded guilty in 2022 and was the star witness in Bankman-Fried’s trial, testifying for nearly three days last November.

“I’ve seen a lot of cooperators in 30 years here. I’ve never seen one quite like Ms. Ellison,” Kaplan said.

Still, the judge said that she is “by no means free of culpability” and that there could not be a “get out of jail free card.” Kaplan said a prison sentence was necessary because Ellison had participated in what may have been the “greatest financial fraud ever perpetrated in this country and probably anywhere else.”

Prosecutor Danielle Sassoon sought a sentence well below the maximum sentence. Sassoon argued that Ellison “deserves leniency,” citing her extensive cooperation and testimony in Bankman-Fried’s trial.

The judge set Ellison’s surrender date on or after Nov. 7.

Ellison’s attorney Anjan Sahni also cited her off-and-on romantic relationship with Bankman-Fried in seeking a lighter sentence. The FTX founder was “manipulative,” Sahni said, and made Ellison feel bad if she had made a wrong trading decision.

Kaplan agreed that Bankman-Fried was a mastermind and Ellison got sucked into a fraudulent scheme.

Ahead of Tuesday’s sentencing, Ellison’s lawyers wrote in a court filing that her relationship with Bankman-Fried and her appointment to an executive role at Alameda Research contributed to her committing crimes at Bankman-Fried’s direction.

“Caroline blames no one but herself for what she did,” the lawyers wrote. “She regrets her role deeply and will carry shame and remorse to her grave.”

In August, a judge approved a settlement between FTX and the Commodity Futures Trading Commission (CFTC) that requires the defunct crypto exchange platform to pay $12.7 billion in compensation to defrauded customers.

The settlement, filed on Aug. 8 at the U.S. District Court for the Southern District of New York, requires FTX to pay $8.7 billion in restitution and $4 billion in disgorgement. The money will be used to compensate victims of what the CFTC described in a statement as a “massive fraudulent scheme” that was orchestrated by Bankman-Fried, a group of FTX insiders, and his now-bankrupt FTX group of companies.

“FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets,” CFTC Chairman Rostin Behnam said in a statement. “But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there.”

The settlement was made as FTX is working through its bankruptcy process by settling legal disputes, selling off assets, and reaching agreements with U.S. regulators.

The company has said that customers will receive 100 percent recovery of their claims against the company.