Caroline Ellison’s Defense Attorneys Request No Prison Sentence for Involvement in FTX Downfall

Caroline Ellison, the former CEO of Alameda Research, is requesting leniency in her sentencing related to her role in the downfall of FTX.

Her legal representatives have urged the court to avoid imposing prison time, proposing a sentence that includes time already served along with supervised release.

In a sentencing memorandum filed on Tuesday, Ellison’s attorneys noted that the U.S. Probation Department has suggested time served accompanied by three years of supervised release due to her cooperation with law enforcement.

Ellison’s Testimony Was Crucial in Bankman-Fried’s Trial

Ellison has been a significant participant in the ongoing inquiry into the collapse of FTX and its former CEO, Sam Bankman-Fried.

Her testimony was instrumental in his trial, which resulted in his conviction on seven counts of fraud and conspiracy.

Bankman-Fried received a 25-year prison sentence in March 2024.

Alameda Research, the trading firm led by Ellison, was closely linked with FTX, raising alarms about possible misuse of customer funds and conflicts of interest stemming from FTX’s loans to Alameda.

Caroline Ellison’s attorneys are seeking to redact portions of her sentencing submission due to her being “the focus of intense media scrutiny and Internet fascination” pic.twitter.com/d2d8Ip98oS

— Jacob Shamsian (@JayShams) September 10, 2024

In their submission, Ellison’s legal team emphasized her collaboration with both the government and the FTX bankruptcy estate, highlighting that her assistance had enabled the recovery of hundreds of millions of dollars in assets for creditors.

They contended that Ellison’s actions reflected accountability and that she presented no threat of future offenses.

The team argued that leniency would foster respect for the law and recognize her cooperation.

Ellison’s sentencing is set for September 24 in New York. She is facing multiple charges, including wire fraud and conspiracy to commit money laundering.

Support for leniency has also been expressed by John J. Ray III, CEO of the FTX bankruptcy estate, and Robert J. Cleary, the bankruptcy examiner, both of whom commended her contributions to the investigation and recovery efforts.

FTX Resolves $600M Robinhood Shares Dispute

Recently, FTX reached an agreement with Emergent Technologies, a company co-founded by Bankman-Fried, regarding a dispute over more than $600 million in Robinhood shares.

According to the settlement, FTX will pay Emergent $14 million to cover administrative costs associated with withdrawing its petition for 55 million Robinhood shares and cash.

The ownership of the Robinhood shares has been contested by several parties, including FTX, BlockFi, Bankman-Fried, and Emergent.

The shares were seized by the U.S. Department of Justice in January 2023, following the collapse of FTX in November 2022, and were subsequently repurchased by Robinhood for approximately $606 million on September 1, 2023.

Meanwhile, the SEC cautioned last week that it may challenge FTX’s repayment plan if it involves returning funds to creditors using stablecoins.

SEC attorneys indicated that while repaying creditors with stablecoins might not be explicitly illegal, the agency retains the right to contest such repayments if they involve US-dollar pegged crypto assets.

FTX has explored various strategies to compensate creditors, including a shelved plan to revive the exchange.

The latest proposal from FTX entails liquidating assets and settling claims based on the U.S. dollar value of those assets at the time of the exchange’s bankruptcy.

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