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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Caroline Ellison, the former boss of the trading firm through which FTX gambled billions of dollars in customer funds, has been sentenced to two years in prison, despite aiding prosecutors in the criminal case against Sam Bankman-Fried, the collapsed cryptocurrency exchange’s founder.
Judge Lewis Kaplan imposed the sentence during a hearing in a New York federal court on Tuesday. “To all the victims and everyone I harmed . . . I am so so sorry,” a tearful Ellison told the court ahead of Kaplan’s decision. “I am deeply ashamed.”
The penalty for Ellison, who ran FTX-affiliated trading fund Alameda Research, contrasts sharply with the 25-year prison sentence handed to Bankman-Fried in March, which is among the longest US sentences ever for a white-collar criminal. Another former FTX executive, Ryan Salame, received a 90-month sentence in May.
FTX was one of the world’s biggest crypto exchanges when it collapsed in November 2022 following revelations that Alameda had secretly siphoned billions of dollars in customer deposits.
Ellison, who quickly pleaded guilty to fraud and money-laundering charges soon after FTX’s implosion, testified for several days at Bankman-Fried’s trial, in which she was the star witness.
She walked the jury through spreadsheets, internal documents and private Signal chats that painted a picture of a years-long criminal conspiracy by the one-time crypto billionaire.
While on the stand, Ellison revealed the FTX founder had directed her and her ex-colleagues to steal roughly $10bn of customer deposits from the exchange to fund risky investments and repay loans.
She said Bankman-Fried had directed her to create seven “alternative” balance sheets for Alameda, some of which disguised billions of dollars of kickbacks to FTX executives, and was ordered to cover up how the trading group was “borrowing $10bn from FTX customers”.
A version of Alameda’s accounts that made its “assets look larger” was provided to crypto lenders, including Genesis, which was calling in loans amid a sharp downturn in the sector, Ellison testified. Genesis’s lending unit later went bankrupt.
Prosecutors had urged leniency for Ellison, 29. In a letter to Kaplan ahead of the hearing, they highlighted how Ellison “was crucial to the government’s successful prosecution of Samuel Bankman-Fried for one of the largest financial frauds in history”, and provided “substantial assistance in the investigation”.
They added that Ellison, who was formerly in an “on-again, off-again” romantic relationship with Bankman-Fried, was humiliated in the press as a result of her testimony and had her private conversations with a therapist divulged in Michael Lewis’s book on the FTX collapse.
“The government cannot think of another co-operating witness in recent history who has received a greater level of attention and harassment,” they wrote.
A graduate of Stanford University, Ellison met Bankman-Fried at high-speed trading company Jane Street, before leaving to join Alameda with him. She was in charge of running the trading firm and had described feeling trapped and pulled into Bankman-Fried’s warped moral worldview.
While awaiting sentencing, Ellison has written a novella “set in Edwardian England and loosely based on her sister Kate’s imagined amorous exploits”, the former executive’s mother revealed in a letter to the court.
Two other former senior FTX executives who also pleaded guilty, Nishad Singh and Gary Wang, are set to be sentenced later this year.
