Caroline Ellison must go to prison for 2 years

A blessing in disguise for Caroline Ellison, the co-conspirator in the largest fraud case the crypto world has ever seen. She has been sentenced to two years in prison by a New York court for fraud and money laundering. Ellison had helped to embezzle $8 billion. Because she provided valuable assistance as a key witness, her sentence is comparatively mild. She will serve her sentence in a prison near Boston, where her family lives.

Other defendants were hit harder. Sam Bankman-Fried, the head of the failed crypto exchange FTX and mastermind of the fraud scheme, has been sentenced to 25 years behind bars. He is already serving his sentence in a prison in Brooklyn, New York, but has filed an appeal against the verdict: He argues that the judge in the case was biased.

Two other senior FTX employees also testified. Like Ellison, they heavily incriminated Bankman-Fried in order to get off with a lighter sentence. Another co-conspirator entered a guilty plea but declined to incriminate Bankman-Fried. He was sentenced in May to seven and a half years in prison.

The Crown Witness

Judge Lewis Kaplan, who had already sentenced Bankman-Fried, praised Ellison at the sentencing on Tuesday. She showed genuine remorse and her cooperation with the investigators was significant. He could not remember her contradicting herself even once during the trial.

Even the prosecutors had told the judge that Ellison’s conduct during the trial had been exemplary. She also had to endure numerous forms of harassment, partly because her private life was discussed in public during the trial against Bankman-Fried.

“You were vulnerable and you were taken advantage of,” Kaplan said to Ellison. Nevertheless, he could not give her a “get out of jail free” card. The fraud case was too serious for that.

The defense had demanded an acquittal for Ellison. Some legal experts also complained in the American media that the punishment could deter future key witnesses. The now 29-year-old had already fully confessed to her role in the fraud case shortly after the collapse of FTX. As a witness, she subsequently explained the chaotic inner workings of the crypto exchange to investigators in numerous sessions and thus helped them significantly to secure a conviction of Bankman-Fried.

“Not a day goes by that I don’t think about the victims I hurt,” Ellison said in court on Tuesday. “I am very ashamed of what I did.”

An important helper – and lover

Ellison played a central role in Bankman-Fried’s Bitcoin empire. She had headed the hedge fund Alameda Research, FTX’s sister company. Bankman-Fried, together with his helpers, moved large amounts of crypto assets from FTX customers to Alameda Research without their consent. Bankman-Fried had the software developed by FTX reprogrammed specifically for this purpose.

The embezzled $8 billion was then used for speculative crypto transactions, but also for political lobbying, house purchases, and other private expenses. In November 2022, panic set in among FTX customers, and many withdrew their assets from the platform. Because of the previous fraud, FTX was unable to pay out many of them. A hole of $8 billion remained.

Sam Bankman-Fried and Caroline Ellison were also a couple in private for a while, but kept their relationship secret. She still jetted around the world with the FTX founder, who is celebrated in some circles as a crypto guru, and lived with him and other employees in a luxurious villa in the Bahamas. According to Ellison’s defenders, however, it was a “toxic” relationship: Bankman-Fried showered her with attention at times, but then withdrew it again.

According to court documents presented by the defense, Ellison is also struggling with the consequences of her past at FTX outside of the courtroom. She can’t find a job. She didn’t get a job helping poor families with their tax returns when the potential employer found out about her past.

Ellison is also said to have worked on a mathematics textbook with her parents, who both teach at the prestigious Boston University MIT. In addition, US media reports unanimously state that her mother told the court that Ellison had written a novella, set in Edward VII’s England and loosely based on amorous love affairs imagined by her sister Kate.

The crypto caravan has moved on

The collapse of FTX shocked the crypto world in 2022 and accelerated the collapse of the Bitcoin price. But as many industry observers anticipated at the time, Bitcoin quickly recovered from the fraud.

With the conviction of Caroline Ellison, another chapter from the Wild West era of the crypto scene ends. However, digital currencies such as Bitcoin still deeply divide investors. Some believe that the era of fortune hunters and charlatans has come to an end with the FTX case. Others are convinced that many providers are still making exaggerated promises to customers – and that the whole thing will end in a shambles again.