Facing more than a century in prison, FTX co-founder Sam Bankman-Fried’s ex-girlfriend negotiated a plea deal with the federal government and admitted where customers’ assets were going.
While Bankman-Fried had been dealing with Bahamian courts and extradition after his arrest earlier in the week one day before he was expected to testify before the House Financial Services Committee, 28-year-old Caroline Ellison had been making arrangements with authorities as well. The CEO of Alameda Research and ex to Bankman-Fried, Ellison pleaded guilty Monday to multiple charges of conspiracy to commit fraud and money laundering seemingly in an effort to reduce a sentence that could result in as much as 110 years behind bars.
Speaking before U.S. District Judge Ronnie Abrams in Manhattan federal court Monday, according to the transcript unsealed Thursday, Ellison explained, “From 2019 through 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried. In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having negative balances and without being subject to margin calls on FTX.com’s liquidation protocols.”
Ellison also said, “if Alameda’s FTX accounts had significant negative balances in any particular currency, it meant that Alameda was borrowing funds that FTX’s customers had deposited on the exchange.”
Ultimately, her testimony admitted that lenders were being misled about how their money was being handled before the business collapsed in November with Alameda left owing FTX customers approximately $8 billion of their own money. Agreeing to “waive any defenses” and “make restitution in an amount” to be determined later, the disgraced CEO will also continue to cooperate with prosecutors including providing any records requested in the investigation against Bankman-Fried.
The counts she plead guilty to included: conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering with a combined maximum sentence of 110 years imprisonment.
“I am truly sorry for what I did,” Ellison told the court Monday. “I knew that it was wrong.”
Joining her in making a plea deal was FTX co-founder Gary Wang who also agreed to “cooperate fully” with the investigation. Both Wang and Ellison posted bail for $250,000, a thousand times less than the record $250 million bail of Bankman-Fried Thursday.
It remains unknown what the final sentence for Ellison could be, but in speaking with the New York Post, former federal prosecutor Moira Penza said, “It is not unheard of for testifying cooperators, even ones facing as long a sentence as Ms. Ellison, to receive probation rather than any prison term.”
“Ms. Ellison was in the door as early as she could be and didn’t even need to be indicted. She is signaling at every opportunity that she is taking responsibility and is truly remorseful. If she ends up having to testify at trial against SBF or others that would make her cooperation even more significant and be a further argument for reducing her sentence,” Penza added.
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