The former FTX executive Caroline Ellison, leaving federal court in Manhattan on Tuesday, received a harsher sentence than many legal experts had expected.
Credit...Karsten Moran for The New York Times

Caroline Ellison, Star Witness at FTX Trial, Is Sentenced to 2 Years in Prison

A top adviser to Sam Bankman-Fried, the disgraced founder of FTX, Ms. Ellison pleaded guilty to conspiring with him to steal $8 billion and became a crucial witness for the prosecution.

by · NY Times

Caroline Ellison, a former top adviser to the cryptocurrency mogul Sam Bankman-Fried, was sentenced to two years in prison on Tuesday for her role in the $8 billion fraud that led to the implosion of the once high-flying FTX crypto exchange.

Judge Lewis A. Kaplan of U.S. District Court in Manhattan said that he believed Ms. Ellison was genuinely remorseful and that her cooperation with the government had been substantial. But given the severity of the fraud, he added, he could not give her a “‘get out of jail free’ card.”

Ms. Ellison is set to report to a minimum security prison in the Boston area by around Nov. 7, almost exactly two years after FTX collapsed.

Soon after the downfall of FTX in 2022, Ms. Ellison, who was Mr. Bankman-Fried’s on-and-off girlfriend, pleaded guilty to conspiring with him to steal $8 billion in savings that customers had deposited on the exchange. She became a crucial witness for the prosecution, testifying against Mr. Bankman-Fried at a trial last year that ended in his conviction on seven counts of fraud and conspiracy.

Wearing a dark jacket over a mauve-colored dress, Ms. Ellison, 29, fought back tears as she told Judge Kaplan that she was sorry for all the pain she had caused to the customers and employees of FTX, as well as her family and friends.

“Not a day goes by that I don’t think of the people I hurt,” Ms. Ellison said before she was sentenced, with her parents and two sisters in the courtroom. “I am deeply ashamed of what I have done.”

Ms. Ellison was one of three top executives who pleaded guilty and agreed to work with prosecutors to convict Mr. Bankman-Fried. The other two executives, Gary Wang and Nishad Singh, are set to be sentenced this fall. A fourth executive, Ryan Salame, who pleaded guilty but did not testify against Mr. Bankman-Fried, was sentenced in May to seven and a half years in prison.

Mr. Bankman-Fried is serving a 25-year prison term at a federal jail in Brooklyn and has filed an appeal to overturn his conviction, arguing that Judge Kaplan was biased against him.

Prosecutors did not recommend a specific sentence for Ms. Ellison, but they filed a memo to Judge Kaplan praising her “exemplary” cooperation with the government. Her lawyers requested that she serve no prison time.

“I have seen a lot of cooperators. I have never seen one like Ms. Ellison,” Judge Kaplan said before announcing the sentence. “What she said on the stand was very incriminating of herself, and she pulled no punches about it.”

He emphasized that she was far less culpable in FTX’s collapse than Mr. Bankman-Fried. “She cooperated and he denied the whole thing,” he said.

Just two years ago, Ms. Ellison was a powerful but relatively low-profile crypto executive, overseeing Mr. Bankman-Fried’s hedge fund, Alameda Research. She and Mr. Bankman-Fried had secretly dated for years, and she followed him around the world — from Berkeley, Calif., to Hong Kong to the Bahamas — as he built a crypto empire.

The relationship was often toxic, Ms. Ellison’s lawyer wrote in a memo to Judge Kaplan. Mr. Bankman-Fried would shower her with attention, and then ignore her. He insisted on keeping the liaison secret, the lawyers said, and had told Ms. Ellison that he didn’t want to be seen in public with her. Mr. Bankman-Fried also pushed her to take Adderall so that she could work longer hours, the memo said.

At the sentencing, Ms. Ellison’s lawyer, Anjan Sahni, said she was a good person who should have walked away from Mr. Bankman-Fried and never participated in the fraud at FTX. But she couldn’t, he said, because her personal and professional lives had come to revolve around him.

“Caroline should have left,” Mr. Sahni told Judge Kaplan. “Every day she profoundly regrets her decision not to.”

Ms. Ellison was thrust into the spotlight when FTX and Alameda collapsed in November 2022, after a run on deposits exposed an $8 billion hole in the crypto exchange’s accounts. Soon federal prosecutors charged Mr. Bankman-Fried with fraud, saying that he had transferred billions of dollars from FTX to Alameda, and then used the money to make venture investments, political contributions and other lavish purchases.

Ms. Ellison pleaded guilty to participating in Mr. Bankman-Fried’s conspiracy. She became a subject of internet fascination and was mobbed by photographers when she showed up at federal court in Manhattan to testify against Mr. Bankman-Fried during his trial. “The government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” the prosecutors wrote in their memo to Judge Kaplan.

Behind the scenes, Ms. Ellison was crucial to helping the prosecutors build their case against Mr. Bankman-Fried. She combed through FTX’s records to help identify a spreadsheet that prosecutors presented at the trial as evidence that Mr. Bankman-Fried had lied to his business partners.

And over nearly three days on the witness stand, Ms. Ellison delivered some of the trial’s most emotionally raw testimony, recounting in minute detail how Mr. Bankman-Fried had orchestrated the fraud that brought down FTX. Holding back tears, she also described the dramatic final days of the company and said she had felt a sense of relief when the scheme finally unraveled.

Judge Kaplan called Ms. Ellison “genuinely remorseful” and said he couldn’t remember a single time that she had contradicted herself or offered inconsistent testimony.

But Mr. Bankman-Fried was her “kryptonite,” he said. “You were vulnerable, and you were exploited.”

Ms. Ellison’s sentence was harsher than many legal experts had expected. The government had “telegraphed no jail time for her,” said John P. Fishwick Jr., a former U.S. attorney for the Western District of Virginia. “A two-year sentence will discourage future cooperators.”

Ms. Ellison has also agreed to forfeit all the wealth she accumulated while working at FTX and to continue working with the government to recover funds for victims.

Since her guilty plea, Ms. Ellison has struggled to find paying work, according to the memo her lawyers filed. At one point, the memo said, she had secured a position helping low-income families with their taxes, only to have the offer revoked after the employer realized who she was.

In recent months, Ms. Ellison has collaborated on a math textbook with her parents, who both teach at the Massachusetts Institute of Technology. And she has written a novella set in Edwardian England that is “loosely based on her sister Kate’s imagined amorous exploits,” her mother, Sara Fisher Ellison, wrote in a letter to the court.

Ms. Ellison has remained “calm and hard working and grateful,” despite the legal scrutiny, her mother wrote. “I, of course, notice that she is a smaller, sadder version of her former self, but her core qualities remain.”

At the hearing, Ms. Ellison’s mother sat in the front row, holding hands with her husband, Glenn Ellison. After Judge Kaplan handed down the sentence, a court official cleared the courtroom of everyone but Ms. Ellison’s family. Then he brought them a box of tissues.

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