Why did SBF's ex-girlfriend Caroline Ellison receive only a two-year prison sentence?

Author: Felix, PANews

On September 25, U.S. Judge Lewis Kaplan sentenced Caroline Ellison, the main witness in the case against former FTX CEO SBF (Sam Bankman-Fried) and former co-CEO of Alameda Research and SBF's ex-girlfriend, to two years in prison. Ellison will also forfeit approximately $11 billion and can serve her sentence in a "minimum security prison."

The 29-year-old Ellison pleaded guilty about two years ago (in December 2022), admitting to seven charges, including two counts of conspiracy to commit wire fraud, two counts of actual wire fraud, one count of conspiracy to commit commodities fraud, one count of conspiracy to commit securities fraud, and one count of conspiracy to commit money laundering, facing a maximum sentence of 110 years. She testified against SBF for nearly three days during the trial last November.

Sincere Attitude Earns Leniency from the Court

Despite the maximum 110-year sentence, she was ultimately sentenced to only 2 years. In a court document, prosecutors stated that Ellison's testimony was the "cornerstone" of the case against SBF. In court, U.S. Assistant Attorney Danielle Sassoon called for leniency, stating that Ellison's testimony was "devastating and powerful evidence" against SBF.

Prosecutors noted that Ellison's performance on the witness stand was in stark contrast to SBF's, saying that SBF was "evasive, even contemptuous, and unable to answer questions directly" while testifying.

Judge Lewis Kaplan remarked that Ellison's "cooperation with the prosecutors was very, very substantial," which earned her a lenient sentence. "I've worked here for 30 years and have seen many cooperators. But I've never seen anyone like Ms. Ellison," he stated, noting that he found "not a shred of factual error, not a hint of inconsistency" in her testimony.

However, Judge Kaplan indicated that a prison sentence was necessary because the case Ellison was involved in could be "the largest financial fraud in the history of this country or even the world," or at least close to it. In such a serious case, cooperation cannot serve as a get-out-of-jail-free card.

At the sentencing, Ellison expressed deep apologies to all those harmed by the fraud that occurred from 2017 to 2022. Surrounded by her lawyers, Ellison did not make any statements as she left the Manhattan federal court.

In contrast, SBF was sentenced to 25 years in prison for orchestrating a multi-billion dollar fraud scheme with FTX. SBF has since appealed the verdict.

Ellison Exposes SBF's "Backroom Deals"

During her three days on the witness stand last October, Ellison revealed SBF's fraudulent activities at FTX and Alameda, capturing the jury's attention.

Ellison explained how SBF illegally used customer deposits at FTX to cover Alameda Research's multi-billion dollar losses and distorted the financial strength of both companies.

These backroom deals intensified in May and June 2022 when the crypto market hit rock bottom, triggering a series of collapses among lending institutions and investment firms like Celsius and Three Arrows Capital.

Ellison stated that as Alameda's balance sheet deteriorated, SBF instructed her and other colleagues to carry out these fraudulent activities. A major issue was that most of the funds were collateralized by FTX's token, FTT, which was collapsing.

Ellison also told the jury how SBF directed the forging of documents to cover up the scheme.

Ellison's lawyer, Anjan Sahni, requested the judge to spare her client from imprisonment, arguing that "the circumstances are unique," including Ellison's tumultuous romantic relationship with SBF and the harm caused by her "entire career and personal life revolving around SBF."

"Ellison does not blame anyone but herself. She deeply regrets her actions and will carry shame and remorse to her grave," Ellison's defense team wrote.

The defense team noted that due to fear of being recognized, Ellison "has become reluctant to appear in public" and has "effectively lost her job."

Ellison's lawyers also accused SBF of manipulation during their relationship. The team reminded the court that SBF leaked Ellison's diary to the media in 2023.

Last week, prosecutors expressed gratitude for Ellison's assistance in convicting SBF.

Cooperation of Witnesses to Mitigate Punishment is Precedented

Cooperating witnesses sometimes escape punishment more easily, especially if they help catch bigger fish.

In the late 1990s, Enron's CFO Andrew Fastow, who was involved in orchestrating a massive fraud scheme at Enron, was sentenced to 6 years in prison after testifying about the role of CEO Jeffrey Skilling in the case.

Judge Kaplan stated in court that there are three differences between Ellison's case and SBF's.

First is Ellison's cooperation with the government; among other evidence, Ellison provided proof that SBF had instructed her to create multiple false balance sheets, which were then used to reassure nervous lenders.

Second, Judge Kaplan believed that Ellison's culpability was far less than SBF's. Ellison's motivation was not greed. Instead, she was too eager to please SBF, who referred to her as "his kryptonite." Judge Kaplan stated, "Ellison was vulnerable, and she was exploited."

Lastly, there is Ellison's remorse. Judge Kaplan believed that "Ellison's remorse is genuine."

In June 2022, Ellison noticed irregularities in Alameda's FTX accounts and informed FTX's engineering director, Nishad Singh, of her concerns.

In September of this year, Ellison told Nishad Singh that she was increasingly worried about Alameda's market risks. Nishad Singh then relayed this information to SBF. FTX collapsed in November 2022.

Both Nishad Singh and Ellison testified against SBF during the trial. Nishad Singh is scheduled to be sentenced on October 30. Another cooperating witness, FTX's CTO Gary Wang, is set to be sentenced on November 20.

Ryan Salame, former co-CEO of FTX's Bahamas subsidiary, was sentenced to seven and a half years in prison in May. He is set to begin serving his sentence on October 13.

Judge Kaplan stated that Ellison would not reoffend and ordered her to serve her sentence in a minimum security prison as close as possible to Boston, where she grew up. "Every aspect of your life has been made public, to an unprecedented degree." "I hope this sentence will bring some relief."

Documents show that Ellison has been ordered to report to prison by November 7.