Caroline Ellison, former CEO of Alameda Research and key witness in the case against FTX founder Sam Bankman-Fried, reported to a low-security federal prison in Connecticut on Thursday.
In September, the court sentenced Ellison to two years in prison and ordered her to forfeit $11 billion for her role in the fraud and conspiracy that collapsed the cryptocurrency exchange once valued at $32 billion.
Caroline Ellison Begins Prison Sentence
Caroline Ellison, the star witness in the prosecution of FTX founder Sam Bankman-Fried, has reported to a low-security federal prison in Connecticut, a Bureau of Prisons spokesperson said Thursday.
Ellison was sentenced in September to two years in prison. She was also ordered to forfeit $11 billion for her role in the multibillion-dollar fraud. The mentioned fraud brought down what was once a $32 billion cryptocurrency exchange.
The federal Probation Department recommended a sentence of three years of supervised release with no prison time. Ellison’s defense lawyers also sought a non-custodial sentence but Judge Lewis Kaplan opted for prison time. Kaplan though commended Ellison’s extensive cooperation with prosecutors. He said it was really valuable to securing Bankman-Fried’s conviction. However, he stated that a custodial sentence was necessary as one factor in deterring fraudsters in the future.
Caroline Ellison was the chief executive of Alameda Research, the hedge fund sister company of crypto exchange FTX. She was also at the center of the scheme to misappropriate billions in customer money. At the time, Ellison was the romantic partner and business associate of Sam Bankman-Fried. She managed Alameda as it soaked up much of the $8 billion Bankman-Fried secretly took from FTX.
That money belonged first to customers who had deposited cash on the FTX exchange for investment. Instead, it became venture capital for a series of Alameda’s high-risk trades and, in part, for funding other business activities.
Judge Being ‘Soft’ With Ellison Sentencing
A month after the high-profile collapse of FTX into bankruptcy in December 2022, Ellison reached a plea deal with federal prosecutors. She pleaded guilty to conspiracy and financial fraud charges. Judge Lewis Kaplan thus gave a sentence while reprimanding FTX’s fraud, which had never been seen before in American financial history.
He termed it the largest-ever financial fraud committed. Resisting pleas for leniency from the Probation Department, which recommended three years of supervised release, Kaplan said he could not give her a “literal get-out-of-jail-free card.”
Kaplan credited Ellison’s extraordinary cooperation with the government, balancing her contrition and stress from testifying against Bankman-Fried.
“I have seen many cooperators over the years, and I have never seen one quite like Miss Ellison,” Kaplan said. He allowed her to be released on bail and stay free, pending reporting to prison no later than Nov. 7.
However, Ellison isn’t the only one who testified against SBF. Just recently, FTX co-founder Gary Wang has requested a federal judge not to send him to prison. He noted that he is also testifying against the former business partner, Sam Bankman-Fried, someone he has known for a long time in a fraud case.
The FTX Saga Continues
During her sentencing, an at-times tearful Ellison was contrite and ashamed, offering an apology to those she hurt and also stating that she did not dare to step away from her relationship with Bankman-Fried and her job at FTX.
Judge Kaplan sentenced Ellison to two years in prison and ordered her to forfeit $11 billion in ill-gotten gains. Last month, the court also sentenced former FTX executive Nishad Singh, giving him time served and three years of supervised release, making him the fourth ex-FTX employee to receive a sentence.
Bankman-Fried decided to go to trial and not take a plea deal; earlier this year, court convicted him of seven counts of fraud. Kaplan had given Bankman-Fried a sentence of 25 years in prison and ordered him to forfeit $11 billion since he and Ellison were facing a similar maximum potential sentence of around 110 years for their respective crimes.
Kaplan recently granted the US until Jan. 15, 2025, to negotiate the return of $13.25 million in FTX-linked donations to Democrat-aligned PACs.
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