Ex-Alameda CEO Caroline Ellison Sentenced to Two Years for FTX Collapse

Caroline Ellison, former co-CEO of Alameda Research, was sentenced on Tuesday to two years in prison for her involvement in the collapse of FTX, a cryptocurrency exchange that led to billions of dollars in consumer losses.

Ellison, who had a past relationship with Sam Bankman-Fried, the former CEO of FTX, pleaded guilty in December 2022 to multiple charges, including two counts of conspiracy to commit wire fraud, two counts of wire fraud, and one count each of conspiracy to commit commodities fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering. 

Ellison Apologizes in Court

In addition to her prison sentence, Ellison will forfeit around $11 billion and will serve her time at a “minimum-security facility,” according to Bloomberg.

Addressing the court on Tuesday, Ellison expressed remorse, apologizing to those impacted by her actions. 

“Not a day goes by that I don’t think about all of the people I hurt,” she said.

Ellison had cooperated with authorities and provided testimony against Bankman-Fried during his criminal trial earlier this year. 

In her March court appearance, she stated that Bankman-Fried had instructed her to commit the crimes that ultimately contributed to FTX’s downfall. She revealed that Alameda had access to customer funds through an unlimited credit line and direct access to customer deposits, some of which were sent to Alameda’s bank account.

During Bankman-Fried’s trial, Ellison also admitted that, at his direction, she sent balance sheets to banks that falsely presented Alameda’s financial situation as less risky than it was.

Judge Lewis Kaplan, who presided over both Ellison’s and Bankman-Fried’s cases, noted the key difference between them: Ellison cooperated with authorities, while Bankman-Fried maintained his denial of the charges.

Auditor to Pay $1.95M for FTX-related Allegations

In a related development, international accounting firm Prager Metis has agreed to a $1.95 million settlement with the United States Securities and Exchange Commission (SEC) following accusations of misconduct in its audits of the now-collapsed crypto exchange FTX. The firm also faced charges for violating auditor independence rules.

The SEC accused Prager Metis of negligence-based fraud, claiming that between February 2021 and April 2022, the firm issued audit reports for FTX that incorrectly stated they adhered to Generally Accepted Auditing Standards (GAAS). 

Additionally, the SEC noted that Prager Metis failed to properly assess its capacity to perform these audits, particularly regarding risks associated with FTX’s ties to Alameda Research, a hedge fund connected to the exchange.