Compiled by: Felix, PANews
On September 25, U.S. Judge Lewis Kaplan sentenced Caroline Ellison (former co-CEO of Alameda Research and SBF's ex-girlfriend), the main witness in the case of former FTX CEO SBF (Sam Bankman-Fried), to two years in prison. Ellison will also forfeit approximately $11 billion and may serve her sentence in a "minimum security prison."
Ellison, 29, pleaded guilty about two years ago (December 2022) to seven charges, including two counts of conspiracy to commit wire fraud, two counts of actual wire fraud, one count of conspiracy to commit commodity fraud, one count of conspiracy to commit securities fraud and one count of conspiracy to commit money laundering. He faces a maximum sentence of 110 years in prison and testified against SBF for nearly three days at the trial last November.
Sincere attitude, lenient treatment by the court
Ellison was sentenced to just two years of a maximum 110-year sentence. In a court filing, prosecutors called Ellison's testimony the "cornerstone of the trial" against SBF. In court, Assistant U.S. Attorney Danielle Sassoon called for leniency, calling Ellison's testimony "devastating and powerful evidence" of the charges against SBF.
The prosecutor said Ellison's performance on the witness stand was very different from SBF, who she said was "evasive and even dismissive and unable to answer questions directly" when testifying.
Judge Lewis Kaplan said Ellison's "cooperation with prosecutors was very, very substantial" and had won her a lenient sentence. "I've been here for 30 years and I've seen a lot of cooperators. But I've never seen anyone like Ms. Ellison," he said, noting that he did not find "the slightest factual error, the slightest inconsistency" in Ellison's testimony.
But Judge Lewis Kaplan said a prison sentence was necessary because Ellison was involved in what was arguably "the biggest financial fraud in the history of this country and the world," or at least close to it. Cooperation in a case of this magnitude cannot be a get-out-of-jail-free pass.
At the sentencing, Ellison expressed his deepest apologies to all those harmed by his fraudulent conduct between 2017 and 2022. Surrounded by his lawyers, Ellison made no remarks as he left the Manhattan federal courthouse.
Correspondingly, SBF was sentenced to 25 years in prison for planning FTX's multi-billion dollar fraud. SBF has now appealed the verdict.
Ellison reveals SBF's "black box operation"
During three days on the witness stand last October, Ellison wowed the jury by revealing SBF’s fraudulent scheme at FTX and Alameda.
Ellison explained how SBF illegally used customer deposits at FTX to cover up billions of dollars in losses at Alameda Research and misrepresented the financial strength of both companies.
These shady operations intensified in May and June 2022, when the crypto market hit bottom, triggering a chain reaction of collapses of a number of lenders and investment firms, such as Celsius and Three Arrow Capital.
Ellison said SBF directed her and other colleagues to commit these frauds as Alameda's balance sheet deteriorated. One major problem: most of the funds were collateralized by FTX's token FTT, which was collapsing.
Ellison also told the jury how SBF directed the falsification of documents to cover up the scam.
Ellison's attorney, Anjan Sahni, asked the judge to spare her client a jail term, citing "extraordinary circumstances," including Ellison's on-again, off-again relationship with SBF and the harm she suffered from having her "entire professional and personal life revolved around SBF."
"Ellison has no one to blame but herself. She deeply regrets her actions and will go to her grave with shame and remorse," Ellison's defense team wrote.
The defense team wrote that Ellison "became afraid to appear in public" and "effectively lost his job" because of fear of being recognized.
Ellison's lawyers also accused SBF of playing tricks during their relationship. The team reminded the court that SBF leaked Ellison's diary to the media in 2023.
Last week, prosecutors thanked Ellison for helping to convict SBF.
There is precedent for cooperating witnesses to reduce their punishment
Cooperating witnesses sometimes get away with it more easily, especially if they help catch the big fish.
Andrew Fastow, Enron's chief financial officer who helped orchestrate Enron's massive fraud in the late 1990s, was sentenced to six years in prison after testifying about CEO Jeffrey Skilling's role in the case.
Judge Kaplan told the court there were three differences between Ellison's situation and SBF's.
The first is Ellison's cooperation with the government, in which she provided, among other evidence, evidence that SBF had directed her to produce multiple false balance sheets that were then used to appease nervous lenders.
Second, Judge Kaplan believes that Ellison is far less culpable than SBF. Ellison's motive was not greed. Instead, Ellison was too eager to please SBF, who called Ellison "kryptonite." Judge Kaplan said: "Ellison was vulnerable, and Ellison was taken advantage of."
The third point is Ellison's remorse. Judge Kaplan said, "Ellison's remorse is genuine."
In June 2022, Ellison discovered anomalies in Alameda's FTX account and informed FTX's engineering director Nishad Singh of her concerns.
In September, Ellison told Nishad Singh that she was increasingly concerned about Alameda’s market risks. Nishad Singh then relayed the news to SBF. FTX collapsed in November 2022.
Both Nishad Singh and Ellison testified against SBF during the trial. Nishad Singh is scheduled to be sentenced on October 30. Another cooperating witness, FTX CTO Gary Wang, is scheduled to be sentenced on November 20.
Ryan Salame, former co-CEO of FTX’s Bahamas subsidiary, was sentenced in May to seven and a half years in prison. He will begin serving his sentence on October 13.
Judge Kaplan said Ellison would not reoffend and ordered her to serve her sentence in a minimum-security prison as close to Boston, where she grew up, as possible. "Every aspect of your life has been made public to an unprecedented degree," he said. "Hopefully, this sentence will be mitigated."
Ellison was ordered to report to prison on Nov. 7, documents show.
Related reading: Life in SBF prison: Living with murderers, using rice for "arbitrage"
