Prison case for Ellison The FTX scandal has cost crypto investors around the world billions of dollars
Who is Caroline Ellison and what was her role?
Caroline Ellison, the former co-CEO of Alameda Research (FTX’s sister company), was at the heart of the cryptocurrency giant’s collapse. In addition to her leadership role, she had a personal relationship with Sam Bankman-Fried. A mix of professional and personal relationships fueled suspicions of questionable ethical behavior in the management of both companies.
Furthermore, as a director of Alameda, Ellison admitted to participating in financial manipulation at the behest of Bankman-Fried. In particular, she revealed that the company had access to client funds via an unlimited line of credit, information that was hidden from investors. Her cooperation with the authorities was important in bringing down SBF. But it was not enough to keep her out of prison.
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Two years in prison, but cooperation praised
Ellison’s two-year prison sentence surprised some observers. Initially charged with multiple felonies, she pleaded guilty and cooperated fully with the government.
Indeed, Ellison testified against Bankman-Fried last March, claiming that he had encouraged her to manipulate Alameda’s balance sheets and hide the company’s true risks. Her testimony and the evidence provided were crucial in convicting Bankman-Fried, but it did not erase the impact of her actions on the thousands of harmed investors.
"I want to start by saying how sorry I am. I participated in a criminal conspiracy that stole billions of dollars from people who trusted us (...) Not a day goes by that I don't think about the people I hurt,"
Between his testimony and his cooperation, the federal lawyer requested 3 years of supervised release. Given the damage caused by FTX, Judge Kaplan therefore decided otherwise.
The FTX scandal: an earthquake in the crypto industry
The collapse of FTX was a turning point in the history of our ecosystem. At its peak, the platform managed billions of dollars and enjoyed a solid reputation.
But the revelations about embezzlement and questionable practices at Alameda have undermined trust in the crypto ecosystem.
“You are truly remorseful, Ms. Ellison, but the collapse of FTX remains one of the most serious financial frauds ever committed (…) Your cooperation is remarkable, but it cannot be a ‘get out of jail free’ card
Thanks to Bloomberg’s work during the trial, we know that Kaplan praised Ellison’s cooperation, but insisted on the seriousness of the case. He pointed out that Bankman-Fried's behaviour had been much more problematic, including his blanket denial of responsibility, which led to a much harsher sentence for him, but said that did not exonerate Caroline Ellison.
Caroline Ellison to Forfeit $11 Billion
For her part, Ellison pleaded guilty to:
- two counts of conspiracy to commit fraud,
- two counts of fraud,
- one count of conspiracy to commit commodities fraud,
- one count of conspiracy to commit securities fraud
- one count of conspiracy to commit money laundering.
Ellison will also forfeit approximately $11 billion, marking the end of an era for her and the beginning of a new era of increased regulation in the crypto industry.
“I want to be honest, even if it means giving up everything I’ve earned. I’ve done a lot of harm and I’m not looking to shirk my responsibilities.”
Beyond the $11 billion owed, Ellison will have to serve her sentence in a “minimum security facility.” A difference in treatment highlighted by Judge Kaplan himself. What will happen to Gary Wang and Nishad Singh, Sam Bankman-Fried’s two other lieutenants, who are awaiting their turn in court? Wang’s sentencing is set for November 20, while Singh’s will take place in October. Stay tuned on the Journal du Coin.