Former Alameda CEO Caroline Ellison Sentenced to 2 Years in Prison for Role in FTX Fraud

The fallout from the collapse of FTX, one of the largest cryptocurrency scandals in history, took another step forward on Tuesday when Caroline Ellison, former CEO of Alameda Research, was sentenced to 24 months in prison. Ellison, who had cooperated extensively with prosecutors, played a pivotal role in the downfall of FTX and the conviction of its founder, Sam Bankman-Fried, in 2023.

Ellison, 28, admitted her involvement in the multi-billion-dollar fraud that led to FTX’s bankruptcy and left a trail of financial devastation across crypto markets. Once a rising star in the world of cryptocurrency, Ellison expressed deep remorse during her trial for her role in the scheme, which ultimately stole nearly $8 billion from FTX’s customers.

U.S. District Judge Lewis Kaplan, who presided over the case, acknowledged Ellison’s cooperation in bringing down Bankman-Fried, which significantly influenced her more lenient sentence. “She cooperated, and he denied the whole thing,” Kaplan said during sentencing. Bankman-Fried, who maintained his innocence, was sentenced to 25 years in prison earlier this year.

Ellison’s cooperation included her testimony that detailed how Bankman-Fried directed her to siphon customer funds from FTX into Alameda Research, the crypto hedge fund she oversaw. In emotional court appearances, she described a chaotic work environment at FTX, where unethical practices were rationalized in the name of philanthropy and effective altruism — a philosophy both she and Bankman-Fried endorsed.

Ellison, the daughter of a prominent MIT economics professor, studied math at Stanford University before entering the crypto industry, where she quickly rose to prominence. Her career path intersected with Bankman-Fried’s when they met at a Wall Street trading firm, eventually leading to both a professional and personal relationship.

In addition to her two-year prison sentence, Ellison was ordered to forfeit approximately $7.11 billion in assets. Despite facing up to 110 years in prison for her crimes, prosecutors described her cooperation as “exemplary” and urged the court for leniency. Her defense team argued that she had played a lesser role in orchestrating the fraud and had shown significant repentance.

Ryan Salame, another high-ranking official at FTX who also cooperated with authorities, was sentenced earlier this year to seven and a half years in prison for his involvement in the scandal.

The FTX scandal has had widespread ramifications for the cryptocurrency industry, shaking investor confidence and leading to heightened regulatory scrutiny. While Ellison’s sentencing marks a significant chapter in the legal proceedings, the financial and legal ripples from the collapse of FTX are expected to continue for years to come.

Sam Bankman-Fried is currently appealing his conviction, seeking a retrial in a bid to overturn his 25-year sentence.

Ben Tang
Digital Assets Desk