Caroline Ellison Begins 2 Year Prison Term for Role in FTX Crypto Exchange Collapse

TLDR:

• Caroline Ellison reported to Connecticut federal prison to begin 2-year sentence
• She was ordered to forfeit $11 billion for her role in FTX fraud
• Ellison was key witness against Sam Bankman-Fried, who received 25 years
• Judge Kaplan rejected recommendations for no prison time despite her cooperation
• She ran Alameda Research and was involved in misappropriating $8 billion in customer funds

Caroline Ellison, former CEO of Alameda Research and key witness in the FTX fraud case, reported to a low-security federal prison in Connecticut on Thursday. The 28-year-old executive begins serving a two-year sentence for her role in one of the largest financial frauds in U.S. history.

Ellison’s imprisonment comes after a September sentencing where Judge Lewis Kaplan ordered her to forfeit $11 billion. The sentence marked a middle ground between prosecutors’ recommendations and defense requests for no prison time, reflecting both the gravity of her crimes and her extensive cooperation with authorities.

As CEO of Alameda Research, the hedge fund closely tied to FTX, Ellison played a central role in the misuse of customer funds. The company received approximately $8 billion in money taken from FTX customer accounts, which was then used for trading operations and other unauthorized purposes.

The relationship between Ellison and FTX founder Sam Bankman-Fried extended beyond business. As his former romantic partner, she provided crucial testimony that helped secure Bankman-Fried’s conviction on seven criminal fraud charges. He received a 25-year prison sentence in March 2024.

During her sentencing, Ellison displayed visible remorse, crying as she apologized to those harmed by her actions. She expressed particular regret for not having the courage to distance herself from both FTX and Bankman-Fried when she recognized wrongdoing.

The federal Probation Department had recommended three years of supervised release with no prison time for Ellison. Her defense team also pushed for a non-custodial sentence. However, Judge Kaplan determined that prison time was necessary to deter future financial crimes.

Despite imposing jail time, Kaplan acknowledged the exceptional nature of Ellison’s cooperation with prosecutors.

“I’ve seen a lot of cooperators over the years and I’ve never seen one quite like Miss Ellison,”

he stated during the sentencing. He noted her genuine remorse and the emotional toll her testimony took.

Ellison’s cooperation began early in the case. She reached a plea agreement with prosecutors in December 2022, just one month after FTX’s bankruptcy. She pleaded guilty to conspiracy and financial fraud charges, facing a maximum statutory sentence of 110 years – the same potential maximum as Bankman-Fried.

The contrast between their sentences – two years versus 25 years – reflects their different approaches to the case. While Ellison cooperated fully with authorities, Bankman-Fried chose to stand trial, maintaining his innocence until his conviction.

Other FTX executives have received varying sentences. Former executive Nishad Singh recently received time served and three years of supervised release, becoming the fourth former FTX employee to be sentenced in the case.

FTX’s collapse in November 2022 sent shockwaves through the cryptocurrency industry. The exchange, once valued at $32 billion, fell into bankruptcy after revelations about its misuse of customer funds and questionable business practices came to light.

The prison where Ellison will serve her sentence is a low-security federal facility in Connecticut. She was allowed to remain free on bail until her November 7 surrender date, which she has now met.

Judge Kaplan characterized the FTX case as the largest financial fraud in U.S. history during court proceedings. He emphasized that while Ellison’s cooperation was commendable, a “literal get-out-of-jail-free card” would not serve justice.

Beyond the prison sentence and forfeiture order, the case continues to have broader implications. The court recently granted prosecutors until January 15, 2025, to negotiate the return of $13.25 million in FTX-linked donations to Democrat-aligned PACs.

The Bureau of Prisons confirmed Ellison’s arrival at the Connecticut facility on Thursday, marking the beginning of her two-year term.