How Caroline Ellison Became a Key Witness in the Case: Verdict in New York

In September 2024, a federal court in New York sentenced one of the central figures in the FTX cryptocurrency exchange scandal. Caroline Ellison, 29, the former CEO of Alameda Research, received a 24-month prison sentence. Additionally, she was ordered to pay approximately $11 billion in restitution, and after serving her sentence, she will be under supervision for three years. The court’s decision regarding Ellison contrasts with the approach taken by courts toward other participants involved in this large-scale financial fraud.

The court recommended that Ellison serve her sentence in a minimum-security facility near Boston, where her family resides. Federal law requires that convicted individuals serve at least 75% of their sentence before being eligible for parole.

Judge Kaplan: Acknowledging Exceptional Cooperation

Judge Lewis A. Kaplan, who presided over the case, showed clear sympathy toward the defendant. His remarks reflected an assessment of her role in exposing the criminal scheme. “You were vulnerable and exploited,” he said to Ellison before announcing the verdict. “Your remorse is sincere.”

Most notably, the judge recognized the extent of the defendant’s cooperation with law enforcement. Kaplan noted that in his three decades of judicial experience, he had encountered many witnesses willing to assist investigations, but he had never seen anything like Caroline Ellison’s level of cooperation. This assessment carried particular weight given the amount of damage caused.

However, even acknowledging her exceptional cooperation, the judge could not overlook the severity of the offense. “FTX represents one of the largest financial crimes in this country’s history,” Kaplan emphasized. He explained that despite Ellison’s assistance to the justice system, avoiding prison entirely was impossible. “In such a serious case, I do not have the authority to grant complete freedom from punishment,” he said before delivering the sentence.

Testimony Against Sam Bankman-Fried: A Turning Point in the Investigation

Caroline Ellison’s role in the criminal case against FTX founder Sam Bankman-Fried is of immense importance. During the 2023 trial, she testified about many aspects of the criminal activities. Ellison claimed that Bankman-Fried attempted to bribe foreign politicians and deliberately provided false financial reports to creditors, concealing critical asset data.

Prosecutors described her testimony as a “cornerstone” of the case against Bankman-Fried. Assistant U.S. Attorney Daniel Sassoon, one of the lead prosecutors, emphasized during the trial that without the credible information provided by Ellison, building a comprehensive indictment would have been significantly more difficult.

In early 2024, Bankman-Fried was found guilty on all seven counts and sentenced to 25 years in prison. He is currently appealing the verdict.

Contrast Between the Two Convicted: The Role of Remorse in Sentencing

Caroline Ellison’s sentencing illustrates a fundamental difference in how courts treat participants in the same crime. While Bankman-Fried, according to the court, did not show genuine remorse and tried to minimize his responsibility, Ellison demonstrated deep awareness of her actions.

During the hearing, she delivered a brief statement, apologizing to the victims, FTX and Alameda Research clients, her former colleagues, friends, and family. “The human brain is not equipped to comprehend the scale of large numbers,” she said with a trembling voice. “I can’t even imagine the amount of pain I caused.”

Her attorney, Andjian Sakhni, managing partner at the prestigious law firm WilmerHale, argued that Ellison was misled by Bankman-Fried, with whom she had a romantic relationship. When the company collapsed, she, according to her defense, “reclaimed her moral compass” and decided to fully cooperate with authorities.

Even the Probation Office and the defense recommended that the court consider her assistance to the investigation when determining her sentence.

Practical Implications: Sentencing Terms and Conditions

Ellison has about a month and a half before she must voluntarily report to a federal detention center to begin serving her sentence. Since the crime is federal, strict parole rules apply—she will only be eligible to request early release after serving at least 18 months of her 24-month sentence.

During the hearing, Ellison reflected on how far she had come from the person she once was. “If someone had told me in 2018 that I would plead guilty to fraud, I would have said you’re crazy,” she shared with the court. “At every stage of this process, it became harder and harder to find a way out… I regret not having the courage to stop earlier.”

Expanding Investigations: New Cases of Insider Trading

Alongside the main FTX case, additional investigations are underway related to misconduct on prediction markets platforms. Kalshi, a derivatives trading company, accused two of its users of insider trading. One of them worked for popular content creator MrBeast and allegedly made trades based on information about upcoming episodes of his show.

The platform suspended the offenders and imposed sanctions. Beast Industries, MrBeast’s company, announced it is conducting its own investigation. The Commodity Futures Trading Commission (CFTC) issued a guidance letter highlighting Kalshi’s actions and citing these cases as potential violations of law. The chair of the commission called platforms like Kalshi “the first line of defense” against market manipulation.

Significance of the Ruling in the Cryptocurrency Industry

Caroline Ellison’s sentencing has implications beyond a single court case. It sets a precedent for how the U.S. judicial system views the level of participation in major financial crimes and the importance of full cooperation with authorities.

CoinDesk, a leading publication covering cryptocurrency events and recognized for its investigative reporting on FTX’s collapse, continues to document these proceedings in detail. The publication notes that Ellison’s case demonstrates both the successes of the American justice system in holding individuals accountable and the challenges of balancing justice with the recognition of cooperation provided to investigators.