SBF's ex-girlfriend Ellison was sentenced to two years in prison. What happened in the court?

Authors: Chris Dolmetsch, Bob Van Voris, Teresa Xie, Bloomberg; Translator: Tao Zhu, Golden Finance

A federal judge sentenced Caroline Ellison to 24 months in prison for her role in the collapse of FTX, even though she helped prosecutors convict her former boss and boyfriend, Sam Bankman-Fried.

U.S. District Judge Lewis Kaplan sentenced the 29-year-old Ellison to two years in prison on Tuesday, calling her cooperation "extraordinary" and praising her testimony during the fraud trial. But Kaplan noted that the case was one of the "worst" financial frauds ever and that her cooperation was not a "get out of jail free pass."

“I’ve seen a lot of collaborators in 30 years, but I’ve never seen anyone like Ms. Ellison,” Kaplan said before sentencing. He said the punishment was necessary to deter others from similar behavior because cryptocurrency fraud “is easy and attracts many perpetrators.”

Ellison’s sentencing closes another chapter in the aftermath of the FTX collapse, when a group of young cryptocurrency executives and friends turned against Bankman-Fried and cooperated with prosecutors in hopes of avoiding jail time. FTX filed for bankruptcy in late 2022, revealing a years-long fraud that prosecutors say bilked customers, investors and lenders out of about $10 billion.

Like Bankman-Fried, Ellison was ordered to forfeit $11 billion in criminal proceeds. While it’s almost certain that neither of them will be able to repay the money, such orders are not uncommon in fraud cases. In addition, she will serve three years of probation after the end of her sentence.

Ellison is due to surrender on or after Nov. 7 to serve her sentence. She showed little reaction when the sentencing was announced -- just looking down at the floor, while her mother and sisters both appeared to be in tears and wiped tears with tissues at the end of the hearing.

Friends testify

Ellison spoke briefly in court on Tuesday and apologized to lenders, investors and victims who lost money because of her actions.

"I think about the people I hurt every day," she said through tears. "I'm sorry I wasn't brave enough."

Ellison was the CEO of Alameda Research, a hedge fund controlled by Bankman-Fried that made billions of dollars in venture investments using FTX customer funds. She pleaded guilty to fraud and money laundering charges.

Her punishment could foreshadow the sentencing that Kaplan will give to two other key collaborators in the case, FTX co-founder Gary Wang and former engineering head Nishad Singh, later this fall. Bankman-Fried was sentenced to 25 years in prison for orchestrating FTX’s multibillion-dollar fraud.

Shame and remorse

Ellison had asked Kaplan to spare her prison sentence, and U.S. probation officials recommended that she receive three years of supervised release instead of a prison sentence.

“Carolyn’s first instinct was not to protect herself but to try to make things right,” her attorney Anjaan Sahni told the judge on Tuesday, adding that her cooperation was “the cornerstone of the trial and was marked by extraordinary candor and seriousness.”

Ellison’s lawyers argued that her cooperation was key to the government’s prosecution of Bankman-Fried, and that she immediately returned to the U.S. when the exchange collapsed in the fall of 2022. She then began talking to prosecutors and regulators — “pulling no punches” admitting her guilt while directing authorities to violations they were unaware of.

Tears in the Courtroom

On the witness stand at Bankman-Fried’s fraud trial, Ellison detailed how she worked with him to defraud lenders and customers, and their failed attempts to prevent the company’s collapse.

She testified that she prepared seven “alternative balance sheets” at Bankman-Fried’s request to hide the fact that it had borrowed about $10 billion from FTX customers and loaned about $5 billion to FTX executives and affiliated entities.

Kaplan listed it as one of the “vital pieces of evidence” in the case, noting that she remembered creating them and finding the documents in an interview with prosecutors.

Caroline Ellison arrives at a New York court on October 11, 2023. Photographer: Yuki Iwamura/Bloomberg

She also testified about negotiations between her and Bankman-Fried and other FTX and Alameda employees that she believed involved large bribe payments to Chinese officials to get the government to unfreeze $1 billion in funds that Alameda was embroiled in a money laundering investigation.

It was one of the most dramatic moments of the trial, with Ellison breaking down in tears as she described the days before FTX and Alameda went bankrupt in November 2022. In the hushed courtroom, she told the court it had been the "worst week" of her life and something she had "dreaded for months." That was the last time she and Bankman-Fried saw each other.

'Exemplary cooperation'

Ellison met with the government more than 20 times and carefully led investigators through their probe of FTX's fraud. Bankman-Fried was convicted of all charges last year after a jury deliberated for just hours. He has appealed his conviction and is seeking a new trial, saying the judge prevented him from mounting a proper defense.

Before the hearing, prosecutors praised her cooperation with the investigation into the cryptocurrency exchange as "exemplary." In their memo to the judge, they said they could not think of another cooperating witness in recent history who had “received so much attention and harassment.”

Ellison, the daughter of an MIT economics professor, met Bankman-Fried in 2015 while she was a summer intern at quantitative trading firm Jane Street Group. Three years later, over coffee in the San Francisco Bay Area, Bankman-Fried convinced her to join his new cryptocurrency trading firm, Alameda Research, telling her she could make a lot of money and give it to charity.