Despite flipping on Sam Bankman-Fried, Caroline Ellison gets 2 years in prison for role in FTX fraud

Moments before he decided how long she will spend in prison, Judge Lewis Kaplan pointed to a time when Caroline Ellison told the government about a piece of damningly incriminating evidence, unprompted: that she had fudged Alameda Research’s balance sheets to deceive lenders. 

Her parents, MIT professors Glenn Ellison and Sara Fisher, sat in the courtroom with Ellison’s two sisters, hands locked. Caroline, a small-framed 29-year-old, sat next to her lawyers, her nose red and eyes watering.  

"That's cooperation," Judge Kaplan said in his downtown Manhattan courtroom. "Mr. Bankman-Fried was the opposite."

Much of her sentencing was spent drawing a contrast between Ellison and her boss and one-time boyfriend, Sam Bankman-Fried. It almost seemed like she was about to get off scot-free. 

“Here’s the thing,” Judge Kaplan said, before explaining that he was uncomfortable giving no prison time for a fraud of this scale.

Minutes later, she was sentenced to two years in a low-security prison for playing a critical role in an $8 billion fraud, one of the largest financial fraud schemes in modern history. The lenient sentence – which was more than bettors on prediction market Polymarket predicted – is still pretty remarkable.

Prosecutors, citing her “not only substantial, but exemplary” cooperation with the government, recommended leniency in Ellison’s sentencing, compared to the 40 to 50 years that they found fit for Bankman-Fried. He was ultimately sentenced to 25 years in prison in March after a jury found him guilty of seven charges of fraud and conspiracy. 

Ellison ran Alameda Research, the trading firm that used billions in FTX customer funds to finance venture investments and pay back loans resulting from high-risk cryptocurrency trading. Ellison took a plea deal and served as key witness in the trial against Bankman-Fried.

“I’m sorry I wasn’t brave,” Ellison said in court on Tuesday. 

FTX, a now-defunct cryptocurrency exchange, was run by a group of nerdy, tight-knit 20-somethings that all lived in a luxury penthouse in the Bahamas. Imagine the chess club at your school… but managing billions of dollars. 

Some of them dated, including Ellison and Bankman-Fried. The relationship, as told by her testimony and media reports, was very unequal.

Ellison said on the stand that she was interested in something more serious with Bankman-Fried, while he seemed content with the workplace-subordinate-with-benefits situation they had going on, so long as it was kept under wraps. 

Ellison didn’t have any equity in Alameda even though her title was CEO, while Bankman-Fried had a 90% stake. Despite evidence presented in trial that he had a heavy hand in her decisions at Alameda, Bankman-Fried often attempted to pin blame on Ellison — he put her in charge, after all. 

Before the trial even started, Bankman-Fried was under a gag order for leaking Ellison’s deeply personal and intimate writings to The New York Times. 

He treated her so poorly that it almost made her seem like a victim of this scheme rather than second-in-command. It almost makes you forget that at every moment she had free will to leave or alert authorities. 

The government didn’t charge Bankman-Fried with being an awful ex-boyfriend, nor is Ellison considered a victim in this case just because she was mistreated by him. But I’m sure those details weren’t lost on the jury, which consisted of nine women and three men, or Judge Kaplan, when they decided Bankman-Fried’s fate. 

Two other convicted confidants, Nishad Singh and Gary Wang, also testified and will be sentenced Oct. 30 and Nov. 20, respectively. Ellison’s sentencing may signal that both will face jail time.

Ryan Salame, a former FTX executive who did not testify in the trial, was sentenced to 7.5 years in prison for campaign finance and money-transmitting crimes. Ellison, who has pleaded guilty to more serious crimes, will serve a fraction of the sentence. 

Prosecutors said in their sentencing memo that this is appropriate because what Ellison has been through by way of harassment is a harsh punishment of its own. 

From the prosecutors’ sentencing memo: 

While public scrutiny of a criminal defendant’s or cooperator’s criminal misconduct is understandable, Ellison endured far more than that. She was mobbed outside the courthouse for comment and photographs, making it difficult to enter and exit without an escort, her physical appearance was scrutinized and criticized, and she was mocked in memes and other content on social media. She was featured in Michael Lewis’s New York Times bestseller, Going Infinite, which included details about Ellison that she had shared with a therapist, who in turn divulged that information to Lewis. Her cooperation required her to testify against her former boss and boyfriend, who at the time of their personal and professional relationship held the lion’s share of power and influence at FTX and Alameda. And on top of humiliating her in the press, Bankman-Fried laughed, visibly shook his head, and scoffed at Ellison during her testimony.

News articles about her trial testimony, accompanied by her photograph, abounded. Numerous films and TV shows are in production about the downfall of FTX, which will only perpetuate the public scrutiny Ellison has faced to date. The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment. The attendant professional consequences of this level of notoriety are obvious and unlikely to be short lived. 

Bankman-Fried appealed his conviction earlier this month, saying that the judge was out to get him. 

There were certainly moments in the trial where Judge Kaplan didn’t contain his frustration with Bankman-Fried. Kaplan also did things such as offering the jury pizza or rides home to stay late for deliberations, which may be perceived as rushing them to deliver a verdict. 

We don’t know what the jury thought about Judge Kaplan’s behavior or Bankman-Fried, besides that he’s guilty. (Trust me, I tried asking them.) But Bankman-Fried didn’t do himself many favors. 

For starters, the same parts of his personality that made him a venture capital darling also made him a difficult defendant to sympathize with. Being the kind of person who plays video games during work calls isn’t quite as cute when you’re being accused of misplacing $8 billion. 

Bankman-Fried’s testimony was extremely slippery and almost hard to watch. As a reporter, it was difficult to decipher the world salad or catch any full sentences to quote. The only way for him to help his case was to pin blame on others, but there were mountains of evidence that he ran the show. Ultimately, as I’m sure his lawyers anticipated, it wasn’t a good look.

And looks matter. In our justice system, how you are perceived matters just as much if not more than what you did or didn’t do.

Bankman-Fried didn’t come off as somebody who was remorseful for playing with other people’s hard-earned money without their consent. He came off as somebody who made a risky bet and regretted the result, but didn’t particularly regret his actions. 

Ellison came off as a naive, sympathetic – and more importantly, remorseful – girl trying to make it in a boys club. She was, as her story goes, simply stuck in an emotional and professional power dynamic when she committed the crimes. And to a certain extent, the story worked – but it was not a get-out-of-jail-free card either.

The fall of FTX had all the ingredients of a best-selling movie: sex, money, greed. But in movies there’s often only room for one main villain. And in this case, it was not Caroline Ellison.