Tearful Caroline Ellison gets 2 years in prison for her role in FTX fraud

NEW YORK — Caroline Ellison, the former chief executive of Sam Bankman-Fried’s collapsed FTX cryptocurrency empire, was sentenced to two years in prison Tuesday after apologizing to those affected by the fraud that caused investors, lenders and customers to lose billions of dollars.

Ellison, 29, could have faced a much harsher sentence, but both the judge and prosecutors said she deserved credit for having extensively interviewed federal investigators, pleaded guilty and ultimately testified against Bankman-Fried for three days at his trial last November.

U.S. District Judge Lewis A. Kaplan said Ellison’s cooperation was “very, very significant” and “extraordinary.”

But he added that the prison sentence was necessary because the woman had participated in what was probably “the biggest financial fraud ever committed in this country and probably anywhere else,” or at least to a similar extent.

Ellison was ordered to report to prison on November 7.

FTX was one of the most popular cryptocurrency exchanges in the world, known for its Superbowl TV ad and extensive lobbying campaign in Washington, D.C., before it collapsed in 2022.

U.S. prosecutors have accused Bankman-Fried and other senior executives of stealing stock market customer accounts to make risky investments, reaping millions of dollars in illegal political donations, bribing Chinese officials and buying luxury properties in the Caribbean.

Ellison was the chief executive of Alameda Research, a cryptocurrency hedge fund controlled by Bankman-Fried.

“I am deeply ashamed of what I did,” she told the court, fighting back tears to say she was “very, very sorry” to anyone she had hurt directly or indirectly.

She did not speak as she left federal court in Manhattan surrounded by lawyers.

In court Tuesday, Assistant U.S. Attorney Danielle Sassoon appealed for a lenient sentence, saying Ellison’s testimony was “striking and compelling evidence” against Bankman-Fried, 32, who was found guilty of fraud and sentenced to 25 years in prison.

Anjan Sahni’s lawyer asked the judge to waive her client’s prison sentence, citing “unusual circumstances,” including her irregular romantic relationship with Bankman-Fried and the harm caused by having her “entire professional and personal life revolve around” him.

Judge Kaplan said Ellison’s willingness to cooperate with prosecutors was remarkable.

“I’ve seen a lot of coworkers over 30 years. I’ve never seen anyone like Ms. Ellison,” he said.

But he added that in such a serious case he could not allow cooperation to become a get-out-of-jail-free card, even if it was clear that Bankman-Fried had become “your kryptonite.”

Bankman-Fried also testified at trial, portraying himself to the jury as inexperienced and clumsy, but not a criminal. He admitted making mistakes but said he did not defraud anyone and did not know that Alameda Research had accumulated billions of dollars in debt.

Prosecutor Sassoon described the testimony in court on Tuesday as “evasive, even contemptuous.”

As the business began to fail, Ellison disclosed the massive fraud to her employees even before FTX filed for bankruptcy, according to evidence presented at trial.

Ultimately, she also spoke in detail with criminal and civil investigators in the U.S.

Sassoon said prosecutors were impressed that Ellison did not “jump into a lifeboat” to avoid committing a crime, but instead cooperated fully for nearly two years.

Since testifying in the Bankman-Fried trial, Ellison has done extensive charity work, written a novel and worked with her parents on a math textbook for high school students, her lawyers say.

They said she now has a healthy romantic relationship and has reconnected with high school friends she lost touch with while she was working for Bankman-Fried, and occasionally dated that person from 2017 until late 2022.