Caroline Ellison Sentenced to 24 Months in Prison for Role in FTX Collapse

As the former CEO of Alameda Research, a hedge fund controlled by Bankman-Fried, Ellison used FTX customer funds for high-risk investments. She pleaded guilty to fraud and money laundering charges, and her sentence may serve as a predictor for the outcomes of two other main cooperators in the case, FTX co-founder Gary Wang and former engineering chief Nishad Singh. Meanwhile, Bankman-Fried is currently serving a 25-year prison sentence for orchestrating the fraud.

Throughout her testimony, Ellison detailed how she conspired with Bankman-Fried to mislead lenders and customers, revealing their futile attempts to prevent the company's collapse. She recounted preparing seven “alternative balance sheets” at Bankman-Fried’s request, which obscured the borrowing of around $10 billion from FTX customers and the $5 billion lent to FTX executives and related entities.

Kaplan highlighted this as one of the case's crucial pieces of evidence, noting her ability to recall the creation of these documents during interviews with prosecutors. Ellison also provided testimony regarding discussions among herself, Bankman-Fried, and other FTX and Alameda employees about a purported bribe to Chinese officials aimed at unfreezing $1 billion in Alameda funds tied up in a money-laundering investigation.

Ellison met with the government over 20 times and guided investigators through the details of the FTX fraud. Bankman-Fried was found guilty on all charges last year after a brief jury deliberation, and he is currently appealing his conviction, claiming that the judge hampered his defense.

Prior to the hearing, prosecutors commended Ellison's cooperation as “exemplary,” stating in their memo to the judge that they couldn't recall another cooperating witness in recent history who had faced such extensive attention and harassment.