Former Alameda CEO Caroline Ellison sentenced to two years in prison in FTX fraud scandal

Caroline Ellison, once a key confidante of FTX founder Sam Bankman-Fried, has been sentenced to two years in prison for her role in one of the most notorious financial scandals in cryptocurrency history. Ellison, 29, played a crucial role in Bankman-Fried’s conviction, providing insider information that helped investigators uncover the full extent of the fraud.

As the former CEO of Alameda Research, the hedge fund at the center of the scandal, Ellison had hoped to avoid prison by cooperating with authorities. However, Judge Lewis Kaplan made it clear that a suspended sentence would not have been enough to deter others. He noted her “very, very substantial” cooperation but still handed down the two-year sentence.

Ellison had pleaded guilty to multiple charges, including conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering, each carrying a potential 20-year sentence. Despite the weight of the charges, her cooperation with prosecutors, which led to Bankman-Fried’s conviction, significantly reduced her sentence.

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Bankman-Fried, sentenced to 25 years in March, is currently appealing his conviction for embezzling billions of dollars from FTX customers. The two had been close associates and, at times, romantically involved, which gave Ellison unparalleled insight into the inner workings of FTX and Alameda.

At the heart of the scandal was Alameda’s secret ability to borrow unlimited funds from FTX without providing collateral, a violation that led to a multibillion-dollar deficit in FTX’s accounts when Alameda’s risky trades backfired. This reckless borrowing was part of a complex web of transactions that ultimately caused FTX, once one of the largest cryptocurrency exchanges, to implode in late 2022.

Ellison’s sentence marks a significant moment in the ongoing fallout from FTX’s collapse. Her cooperation may have helped seal Bankman-Fried’s fate, but Judge Kaplan’s decision underscores the serious consequences of financial misconduct, even for those who assist authorities.