FTX Collapse: Why Caroline Ellison Can Walk Away With No Jail Term?

On Tuesday, Alameda Research’s former chief Caroline Elison will be facing her own sentencing for her involvement in the FTX collapse back in November 2022. She’s facing several charges of wire fraud, conspiracy to commit securities fraud, conspiracy to commit commodities fraud as well as money laundering. Despite this, some former federal prosecutors and legal experts believe that Ellison might not face any jail term.

Why Caroline Ellison Can Face No Jail Term

In the US, those involved in white-collar crimes can get some exemption to sentencing considering their cooperation throughout the process. During all of her hearings in the past two years, Alameda Research ex-CEO Caroline Ellison has transparently shared details of several insiders who played some role in the FTX collapse. Former Assistant U.S. Attorney Kevin J. O’Brien said that Ellison’s details proved crucial in cracking this case.

“Because of the closeness of her relationship to Sam, she was able to provide a personal portrait of Bankman-Fried, an elusive character to be sure, that was probably unique in the government’s case,” O’Brien told CNBC.

Previously, the federal Probation Department has suggested “time served with three years of supervised release” for Ellison. It also cited her “extraordinary cooperation with the government” and “otherwise unblemished record”.

Although it’s up to the district judge Lewis Kaplan on whether or not to follow the recommendation, O’Brien stated that, along with a potential fine, it would represent “a fair sentence” given the “enormous value” of Ellison’s cooperation.

Braden Perry, a former senior trial lawyer for the Commodity Futures Trading Commission, said that Ellison is the third executive to be sentenced in the FTX collapse. Despite her involvement in fraudulent activities, “she did not have the same control or directorial authority as SBF, which will likely influence the judge’s decision about imposing a light sentence,” said Perry.

Sentencing in FTX Collapse to Come With Conditions

Caroline Ellison will receive several years of supervised revision and community service even if she faces no jail term. Furthermore, Ellison will face restrictions on trading in crypto and non-crypto markets or traveling abroad.

Ellison’s valuable cooperation portrays her differently from Sam Bankman-Fried who comes across as a repeat offender. While Bankman-Fried’s defense sought a maximum of 6.5 years in prison, Judge Kaplan noted that Ellison’s testimony was key in his decision to sentence Bankman-Fried to nearly four times that.

Following the FTX collapse and bankruptcy, the new administration has cleared the froth and will return $16 billion to creditors. Last week, FTX auditor Prager Metis settled charges with the U.S. Securities and Exchange Commission (SEC).