Former Alameda Research CEO Caroline Ellison may receive a reduced sentence following praise from U.S. prosecutors for her extensive cooperation in the case against former FTX CEO Sam Bankman-Fried. In a September 17 filing to the U.S. District Court for the Southern District of New York, prosecutors acknowledged Ellison’s critical role in helping to secure Bankman-Fried’s conviction while detailing her involvement in the downfall of both Alameda Research and FTX.
Ellison’s Key Role in Bankman-Fried’s Prosecution
Prosecutors described Ellison’s cooperation as “extraordinary,” citing her credible testimony and transparency about her own misconduct. Despite her participation in illegal activities at Alameda Research, including borrowing billions of dollars in FTX user funds, prosecutors emphasized that she was not involved in all aspects of Bankman-Fried’s schemes. They noted that Ellison had no role in FTX’s operations or in designing systems that allowed Alameda to misuse FTX funds.
The filing highlighted that while Ellison did partake in fraudulent activities, she did so under Bankman-Fried’s direction, including creating false balance sheets to cover up Alameda’s $10 billion borrowing from FTX. Her testimony was crucial in outlining how and why these fraudulent activities occurred, which proved to be key in convicting Bankman-Fried on seven felony counts. He was later sentenced to 25 years in prison in March 2024.
Ellison’s Plea and Testimony
After FTX’s collapse in November 2022, Ellison began cooperating with U.S. authorities, eventually pleading guilty to multiple counts of wire fraud, securities fraud, and money laundering. Her testimony during Bankman-Fried’s trial in October 2023 was pivotal, as it shed light on the internal operations at Alameda Research and its role in the broader fraud scheme.
Prosecutors have since credited Ellison for providing valuable insight into both criminal and civil cases, including those filed by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Her cooperation was seen as instrumental in untangling the complex layers of fraud at FTX and Alameda.
Potential for Leniency at Sentencing
Ellison is scheduled for sentencing on September 24, and her legal team has requested time served and three years of supervised release. The September 17 filing by U.S. attorneys suggests that Ellison may receive a more lenient sentence due to her substantial cooperation. Prosecutors acknowledged that although Ellison willingly participated in some of the fraudulent activities, her assistance was critical in holding Bankman-Fried accountable.
Her current whereabouts remain largely unknown to the public since she testified in Bankman-Fried’s trial, but her role in the case has been pivotal in shaping the outcomes of both the criminal and civil lawsuits.
Broader Impact of Ellison’s Cooperation
The filing underscored the importance of Ellison’s testimony in understanding the scope and details of the fraud. Without her cooperation, prosecutors stated that much of the government’s evidence against Bankman-Fried would have been incomplete, making it more challenging to secure a conviction. Ellison’s cooperation has not only aided in the criminal proceedings but has also provided valuable assistance in ongoing civil cases brought by the SEC and CFTC.
As the sentencing date approaches, it remains to be seen how much her cooperation will influence Judge Lewis Kaplan’s decision.
