Judge Hands Tearful Caroline Ellison a 2 Year Sentence Over FTX Fraud

Ellison joined Bankman-Fried’s orbit as a trader at his hedge fund Alameda Research at just 24 years old, and soon becoming its CEO. As she acknowledged during three days of emotional testimony during Bankman-Fried’s trial last fall, she also played a crucial role in the fraud that took down the empire, with FTX funneling billions in dollars of customer assets to fund disastrous trades at Alameda, along with luxury real estate, illegal campaign donations, and venture investments.

On Tuesday, Ellison admitted once again that she should have stopped the fraud sooner, but she was unable to, drawn in by what she describes as her admiration—and often unrequited love—of Bankman-Fried. “I’m sorry I wasn’t brave,” she said.

Despite her role in what Kaplan characterized as “the greatest financial fraud ever committed in this country,” both Ellison’s lawyers and prosecutors highlighted her work with the government and the FTX bankruptcy estate to recover assets for customers and build the case against Bankman-Fried. Assistant U.S. Attorney Danielle Sassoon argued that Ellison deserved a lenient sentence for her cooperation.

After a lengthy monologue extolling the history of sentencing guidelines, Kaplan praised Ellison’s work with prosecutors, saying that he had “never seen [a cooperator] quite like Ms. Ellison,” with her testimony during Bankman-Fried’s trial containing no errors or inconsistencies.  Still, he questioned why she had followed such a dark path, musing that Bankman-Fried was her “kryptonite.” His sentence of two years was notably stiffer than what Ellison’s lawyers—and the probation department—recommended, although she is unlikely to serve the full time.