By Luc Cohen
NEW YORK (Reuters) – Former cryptocurrency executive Caroline Ellison will be sentenced on Tuesday for her role in the theft of about $8 billion in client funds from the now-bankrupt FTX exchange he founded by her jailed ex-boyfriend Sam Bankman-Fried.
Ellison pleaded guilty to seven felony counts of fraud and conspiracy, and testified as a prosecution witness in the trial of Bankman-Fried, who was convicted of fraud and other charges last year and is serving a 25-year prison sentence stemming from the November 2022 collapse of FTX.
At his sentencing hearing scheduled for 3 p.m. EDT (1900 GMT) before U.S. District Judge Lewis Kaplan in Manhattan, Ellison will learn how much leniency he will get for his cooperation with prosecutors.
Ellison, 29, is almost certain to receive a much lighter prison sentence than Bankman-Fried. The crimes to which he pleaded guilty carry a maximum sentence of 110 years in prison.
Her lawyers have argued that she should not be sentenced to prison because of her cooperation. Without recommending a specific prison term, the U.S. attorney's office in Manhattan, which brought the charges, also urged Kaplan to be lenient toward Ellison, citing her “extraordinary” cooperation and expression of remorse.
“When FTX collapsed, Bankman-Fried persisted in publicly denying that he had any knowledge or fault,” prosecutors wrote in a Sept. 17 court filing. “Ellison, on the other hand, expressed relief that the fraud was revealed and took responsibility for his wrongdoing.”
Prosecutors said Ellison met with them about 20 times to help them reconstruct FTX's case and make their case against Bankman-Fried.
Prosecutors have called Bankman-Fried's actions one of the largest financial frauds in U.S. history. Bankman-Fried, 32, took advantage of the surge in cryptocurrency prices during the COVID-19 pandemic and, as of October 2021, had a net worth of $26 billion, according to Forbes magazine. He gained prominence as a generous donor to philanthropic causes and Democratic politicians.
His wealth evaporated when FTX crashed in November 2022 amid a wave of customer withdrawals. The firm had been widely seen as a relative safe haven in a cryptocurrency industry plagued by volatility and scams.
A month later, Bankman-Fried was charged with stealing FTX client funds to cover losses at Alameda Research, a cryptocurrency-focused hedge fund he founded and which Ellison ran from 2021 to 2022. Ellison pleaded guilty in December 2022.
Bankman-Fried is appealing her conviction and sentence, arguing that Kaplan wrongly excluded evidence showing he thought FTX had sufficient funds to cover customer withdrawals. Testifying in her own defense at trial, Bankman-Fried admitted making mistakes while running FTX but denied stealing any money.
In his closing argument at the Bankman-Fried trial, defense attorney Mark Cohen accused Ellison of “singling out Sam” to escape the pressure he faced after FTX collapsed.
Ellison testified for three days at Bankman-Fried's trial, telling jurors that he had directed her and others to take money from FTX clients without their knowledge. In tearful testimony, Ellison said she felt “unspeakably bad” about the fraud and that FTX's collapse had taken away the “fear” that weighed on her.
“I felt a sense of relief that I didn't have to lie anymore,” Ellison testified.
Nishad Singh and Gary Wang, two other former FTX executives who cooperated with prosecutors, are scheduled to be sentenced on Oct. 30 and Nov. 20, respectively.
