Caroline Ellison, former girlfriend of Sam Bankman-Fried, sentenced to two years in prison, despite testifying for prosecution in fraud trial
The United States has underlined the risk of prison time for those carrying out crypto fraud, even if they later assist US prosecution efforts.
Reuters reported that former cryptocurrency executive Caroline Ellison has been sentenced to two years in prison for her role in her former boyfriend Sam Bankman-Fried’s theft of $8 billion in customer funds from the now-bankrupt FTX exchange.
FTX had collapsed into Chapter 11 bankruptcy protection back in November 2022, when a multi-billion dollar hole was found in its balance sheet, in what US prosecutors described as one of the biggest financial frauds in American history.
FTX trial
After a notable trial in the United States, Sam Bankman-Fried was eventually sentenced to 25 years in prison.
He is currently appealing the verdict and sentence.
Caroline Ellison (previously Alameda’s chief executive and former girlfriend of Bankman-Fried) had pleaded guilty in December 2022 to seven felony counts of fraud and conspiracy, and agreed to co-operate with the US investigation and testified as a prosecution witness.
Two other executives and former close associates also testified as prosecution witnesses at the trial that Bankman-Fried had directed them to use FTX customer funds to plug losses at Alameda Research.
This included Gary Wang the former chief technology officer at FTX, and Nishad Singh, the former engineering director at FTX.
Nishad Singh and Gary Wang face sentencing hearings on 30 October and 20 November, respectively.
Ryan Salame, a former FTX executive who did not co-operate with prosecutors, was sentenced to 7-1/2 years in prison in May after pleading guilty to making unlawful campaign donations to causes supported by Bankman-Fried.
Prison time
Earlier this month Ellison, aged 29, had pleaded with a federal judge not to send her to prison.
Lawyers for Caroline Ellison had told US District Judge Lewis Kaplan in Manhattan that Ellison had deserved leniency for helping prosecutors build a successful criminal case against Bankman-Fried.
US prosecutors sought leniency as well.
But at a sentencing hearing in Manhattan federal court, Reuters reported that US District Judge Lewis Kaplan said he recognised her extensive cooperation with prosecutors, but was not comfortable with remorse and co-operation being a “get out of jail free card” in a case so serious.
The crimes to which she pleaded guilty carried a maximum sentence of 110 years in prison, Reuters noted.
Judge Kaplan reportedly told Ellison she was “gravely culpable in this fraud,” though he said her “remarkable co-operation” represented a “fundamental distinction” between her and Bankman-Fried.
“There’s no way you’re ever going to do something like this again, I am persuaded,” the judge reportedly told Ellison. “But here’s the thing: this was, if not the very greatest financial fraud ever perpetrated in this country or anywhere else, close to it.”
Ellison reportedly crossed her hands on her lap and looked down at the defence table after the sentence was read.
Without recommending a specific sentence, the US Attorney’s office in Manhattan, had urged Judge Kaplan to go easy on Ellison, Reuters reported.
“I cannot overstate the importance of Ms. Ellison’s testimony in convicting Sam Bankman-Fried,” prosecutor Danielle Sassoon reportedly told the hearing.
Prosecutors said Ellison met with them about 20 times to help them piece together FTX’s collapse and make their case against Bankman-Fried.
“Unlike Bankman-Fried, she is not cunning. There is no evidence she was driven by greed, or that an appetite for risk or power was part of her nature,” Sassoon reportedly said.
Judge Kaplan said he would recommend that Ellison be incarcerated in a minimum-security prison and begin serving her sentence in November.
Ellison may be eligible for release a few months shy of two years if given credit for good behaviour in prison.
