Carolyn Ellison sentenced to two years in prison for involvement in FTX fraud

A former Alameda Research CEO Caroline Ellison appeared at a major hearing in Manhattan federal court. The 29-year-old woman was sentenced to 24 months in prison and three years of supervised release, as well as ordered to return nearly $11 billion obtained through fraud.

Details of the Court Verdict and Incarceration Conditions

Federal Judge Lewis A. Kaplan will deliver the sentence, considering the severity of the crime but also recognizing Ellison’s importance as a key witness in the trial against FTX founder Sam Bankman-Fried. During the sentencing, the judge emphasized that her incarceration will take place in a minimum-security prison near Boston, where her family resides.

Since the crime falls under federal jurisdiction, Ellison will be eligible for early release only after serving 75% of her full sentence. She has approximately 45 days left to voluntarily surrender to the Bureau of Prisons to begin serving her sentence.

Remorse and Court’s Assessment of Cooperation

Judge Kaplan’s attitude toward Caroline Ellison was notable. At the start of the hearing, he stated that he saw genuine remorse and acknowledgment of guilt in her, unlike Bankman-Fried. “You were vulnerable and exploited,” the judge said, highlighting her active cooperation with authorities.

Ellison herself made a public statement of remorse before the verdict was announced. With a trembling voice, she addressed former FTX and Alameda clients, colleagues, and loved ones. “The human mind is poor at grasping large numbers,” she said. “I can’t even imagine the pain I caused.” She also admitted that in 2018 she did not foresee where she would end up, saying, “At every stage of the process, it became harder and harder for me to break free.”

Comparison with Sam Bankman-Fried’s Sentence and Acknowledgment of Cooperation

Judge Kaplan clearly differentiated the approaches of the two defendants in the case. Ellison’s attorney, WilmerHale managing partner Andjin Sakhni, argued that his client was misled by Bankman-Fried, with whom she had a romantic relationship in the past. He claimed that after the FTX collapse, Ellison “restored her moral compass” and began actively assisting the investigation.

In contrast, Sam Bankman-Fried showed no remorse and was sentenced to 25 years in early 2024 on all seven counts of fraud and conspiracy. His lawyers are currently preparing an appeal.

The Role of Ellison’s Testimony in Bankman-Fried’s Conviction

Caroline Ellison’s testimony was crucial to the prosecution of FTX’s founder. During the trial against Bankman-Fried, she described how he attempted to bribe foreign officials and deliberately spread misleading financial information to creditors. U.S. Assistant Prosecutor Daniel Sassoon called Ellison’s testimony “a cornerstone” in Bankman-Fried’s conviction.

Judge Kaplan repeatedly emphasized the exceptional nature of her cooperation: “In 30 years here, I’ve seen many cooperators, but I’ve never seen anyone like Ms. Ellison.” However, the judge also noted that the scale of FTX’s fraud — one of the largest financial crimes in U.S. history — prevents fully ignoring the responsibility of all involved.

Broader Perspective: Cryptocurrency Regulation and Insider Trading

By the time of her sentencing, Ellison had already undergone significant legal and social evaluation through public hearings. Meanwhile, new issues have emerged in the crypto sector: the forecasting platform Kalshi accused two users of insider trading, including an employee of popular content creator MrBeast and a representative of the relevant media company.

The Commodity Futures Trading Commission issued a guidance stating that the platform’s actions are a necessary step to prevent insider trading. The commission’s chair called the relevant platforms “the first line of defense” in combating illegal trading.