Former Alameda Research CEO Caroline Ellison, set to face a sentencing hearing on Sept. 24, may receive a lenient sentence after a recommendation from United States prosecutors.
In a Sept. 17 filing in the US District Court for the Southern District of New York, US Attorneys wrote to Judge Lewis Kaplan to inform him of Ellison’s “extraordinary cooperation” in the prosecution of former FTX CEO Sam “SBF” Bankman-Fried, as well as her assistance into the “wrongdoing at Alameda Research and FTX.” According to prosecutors, she provided “credible and compelling testimony” against Bankman-Fried at trial and was “forthcoming about her own grave misconduct” in FTX’s collapse.
“Ellison played a core role in Bankman-Fried’s criminal schemes, but as the Government noted in Bankman-Fried’s sentencing submission, only he was involved in all aspects of the schemes,” said the filing. “Ellison never worked at FTX and played no role in designing the coding systems that granted Alameda special treatment on FTX and permitted Alameda to accrue a negative balance on FTX by withdrawing FTX customer funds.”
Prosecutors seemed to focus much of the blame for the crimes in the indictment on Bankman-Fried but acknowledged Ellison “willingly participated in misconduct” as Alameda’s CEO. According to prosecutors, at SBF’s direction, Ellison and others borrowed billions of dollars in FTX user funds to pay Alameda lenders.
Cooperating after FTX’s collapse
After FTX’s collapse in November 2022, Ellison began proffering with US government officials on Dec. 8, pleading guilty to seven counts of wire fraud, commodities fraud, securities fraud and money laundering. She testified at Bankman-Fried’s trial in October 2023 that she had created fraudulent balance sheets to cover up Alameda borrowing $10 billion from FTX.
“[…] although it was not her responsibility to interface directly with FTX investors, she played a limited role in the conspiracy to defraud FTX investors, including by agreeing to hide information from FTX auditors,” said the Sept. 17 filing.
Bankman-Fried was convicted of all seven felony counts. In a March 2024 hearing, Judge Kaplan sentenced him to 25 years in prison. On Sept. 13, his lawyers filed an appeal of the conviction and sentence.
Since appearing in court for her testimony, Ellison’s whereabouts and activities have been largely unknown to the general public. On Sept. 10, after months of little movement in her criminal case, her lawyers requested time served and three years’ supervised release. She is scheduled to appear in court on Sept. 24 for her sentencing before Judge Kaplan.
“Ellison’s testimony was critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing. In short, the ‘what’ and ‘how’ of the crimes, as well as the ‘why,’ would have been difficult to prove without Ellison’s testimony, and, at the very least, the Government’s evidence on these points would have been incomplete.”
According to US prosecutors, Ellison also provided “valuable assistance” in civil cases brought by the Securities and Exchange Commission and Commodity Futures Trading Commission. The two regulators had filed lawsuits against Bankman-Fried but agreed to defer the cases until the conclusion of his criminal trial.
Prison or time served?
Given the similar filings from Ellison’s lawyers and prosecutors citing her cooperation, it’s unclear whether Judge Kaplan will sentence her to prison time. The filing described the former CEO’s “earnest remorse” for her involvement and being the subject of intense scrutiny by the media — including from Bankman-Fried, who released Ellison’s online journals to New York Times reporters.
“The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” said the filing. “The attendant professional consequences of this level of notoriety are obvious and unlikely to be shortlived.”
After Bankman-Fried’s sentencing, Judge Kaplan sentenced former FTX Digital Markets co-CEO Ryan Salame — named in the same indictment — to 90 months in prison. However, the judge is considering a petition to vacate Salame’s guilty plea. At the time of publication, he is still expected to report to prison on Oct. 11.
Like Ellison, former FTX engineering director Nishad Singh and co-founder Gary Wang pleaded guilty to criminal charges and cooperated with prosecutors. They are scheduled to appear for sentencing hearings on Oct. 30 and Nov. 20, respectively.
