Caroline Ellison, the former girlfriend and employee of convicted FTX founder Sam Bankman-Fried, was sentenced to 24 months in prison on Tuesday for her involvement in defrauding investors and customers of the cryptocurrency platform prior to its extensive collapse.
U.S. District Judge Lewis Kaplan imposed the two-year sentence along with three years of supervised release. Ellison is also required to forfeit approximately $7.11 billion.
As the CEO of Alameda Research, a sister company of FTX, Ellison played a crucial role when FTX declared bankruptcy in November 2022. She had previously pled guilty to two counts of wire fraud and five conspiracy charges, and has committed to cooperating with prosecutors.
Ellison served as a key witness in the trial against Bankman-Fried, who received a 25-year prison sentence earlier this year after being found guilty on related charges in November. Bankman-Fried continues to assert his innocence and is appealing his conviction and sentence.
Although Ellison faced a potential sentence of up to 110 years, prosecutors recommended leniency, describing her cooperation as “exemplary.” Her defense attorney requested no prison time but a three-year supervised release, emphasizing her integral role in Bankman-Fried’s conviction, her lack of leadership in the fraud, and her expression of remorse.
Ryan Salame, another former senior official at FTX and Alameda Research who cooperated with authorities, received a sentence of seven and a half years earlier this year after pleading guilty to federal charges.
During Bankman-Fried’s trial, Ellison testified that she and other executives engaged in illicit activities at both FTX and Alameda, attributing her actions to Bankman-Fried’s influence.
She acknowledged that billions of dollars from FTX customers were redirected to Alameda for investment purposes and debt repayment. Additionally, Ellison confessed to submitting falsified balance sheets to lenders at Bankman-Fried’s direction, which misrepresented the risk level of the hedge fund.
The fallout from FTX’s collapse has drawn parallels to the Enron scandal, with the crypto exchange merging assets with Alameda Research amid financial difficulties, prompting a wave of customer withdrawals. Bankman-Fried was indicted shortly thereafter.
Bankruptcy proceedings for FTX suggest that victims may eventually recover all their funds, albeit at the values from November 2022, during a significant downturn in the cryptocurrency market.