Why Caroline Ellison Wants Zero Jail Time in FTX Scandal

Caroline Ellison’s legal team is calling for leniency as the former Alameda Research CEO faces trial for her role in the collapse of the FTX exchange.

Meanwhile, FTX founder Sam Bankman-Fried (SBF) is serving a 25-year prison sentence following a court ruling in March 2024. The sentence placed him at the highest end of the sentencing range in high-profile white-collar fraud cases, raising the question: What will happen to Caroline Ellison?

Caroline Ellison Don’t want a prison sentence

Based on the sentencing memorandum filed Tuesday, legal experts noted that the U.S. Probation Department recommended that the time served be accompanied by three years of supervised release. Ellison’s legal defense team, however, is seeking a court order that would eliminate the prison sentence altogether. The attorneys cited her cooperation with authorities, which led to Sam Bankman-Fried’s conviction.

The lawyers also highlighted Ellison’s role in recovering hundreds of millions of dollars in creditors’ assets, saying it was a demonstration of accountability and adding that leniency by recognizing her cooperation would promote respect for the law. In an interesting twist, both John Ray III, CEO of FTX’s bankruptcy estate, and Robert Cleary, the bankruptcy examiner, support the legal team’s call for leniency in Ellison’s sentencing.

“Caroline Ellison’s lawyers are seeking to have portions of her criminal complaint dismissed because she has been the focus of intense media attention and internet fascination,” legal reporter Jacob Shamsian said.

Read more: FTX Collapse Explained: How Sam Bankman-Fried’s Empire Fell

Ellison’s testimony was indeed pivotal during SBF’s trial. On October 10, 2023, she used her time in court to cut a deal with authorities, shifting all responsibility to the FTX CEO. She testified that SBF “directed” her to commit financial crimes, leading to his conviction on seven counts of fraud and conspiracy.

Ellison admitted to embezzling billions of dollars in FTX client funds, some of which were used to cover loans from Alameda. She revealed that SBF had set up systems to facilitate the theft of client funds, including a negative balance feature that gave Alameda a $65 billion line of credit. Additionally, Ellison revealed that she and SBF used mafia-style tactics to unfreeze funds locked up on two Chinese exchanges.

Ellison is scheduled to be sentenced in New York on September 24. She faces charges of wire fraud and conspiracy to commit money laundering. Meanwhile, FTX is moving toward fully reimbursing customers, with the use of stablecoins among the strategies being considered. However, the US SEC said it would challenge FTX’s repayment plan if it involves paying back money to creditors with crypto.

The now-defunct exchange settled its $600 million dispute with Emergent Technologies over Robinhood shares. The U.S. Department of Justice (DOJ) seized the shares in January 2023 following the implosion of the FTX exchange in November 2022. Robinhood later bought the shares on September 1, 2023 for approximately $606 million.

Read more: Crypto Regulation: What are the Pros and Cons?

Under the terms of the settlement, Emergent Technologies, which SBF co-founded, will receive $14 million from FTX for administrative costs. In return, the company has withdrawn its petition for 55 million Robinhood shares and cash. Parties fighting over the shares include FTX, BlockFi, SBF and Emergent Technologies.