Caroline Ellison

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Caroline Ellison
Born: November 1994
Boston, Massachusetts
Charges: Wire fraud, Conspiracy to commit wire fraud, Securities fraud, Conspiracy to commit securities fraud, Conspiracy to commit money laundering
Sentence: 24 months
Facility: FCI Danbury (Connecticut)
Status: Incarcerated

Caroline Ellison (born November 1994) is an American former business executive who served as CEO of Alameda Research, a cryptocurrency trading firm affiliated with the FTX exchange. Following the collapse of FTX in November 2022—one of the largest financial frauds in American history—Ellison pleaded guilty to multiple fraud charges and became a key government witness in the prosecution of FTX founder Sam Bankman-Fried.

On September 24, 2024, Ellison was sentenced to two years in federal prison. Despite facing a potential sentence exceeding 100 years, her extensive cooperation with prosecutors resulted in a dramatically reduced sentence. She was also ordered to forfeit $11 billion and will serve three years of supervised release following her incarceration.

Summary

Caroline Ellison's role in the FTX collapse centered on her position as CEO of Alameda Research, the trading firm that received billions of dollars in FTX customer funds. Alameda, which was founded by Sam Bankman-Fried before FTX, was supposed to be an independent trading operation. In reality, Alameda had a secret line of credit from FTX that allowed it to borrow customer deposits without restriction or collateral.

When cryptocurrency markets declined in 2022, Alameda faced billions in losses. Rather than allow the firm to fail, Bankman-Fried directed Ellison to use FTX customer funds to cover Alameda's positions. Ellison also manipulated Alameda's balance sheets to hide the company's true financial condition from lenders and investors. When the scheme unraveled in November 2022, FTX customers lost access to approximately $8 billion in deposits.

Ellison pleaded guilty on December 19, 2022, and immediately began cooperating with federal prosecutors. Her testimony was instrumental in securing Bankman-Fried's conviction on all seven counts.

Background

Early Life and Education

Caroline Ellison was born in November 1994 in Boston, Massachusetts, to Glenn Ellison and Sara Fisher Ellison, both professors of economics at MIT. She grew up in Cambridge and Newton, Massachusetts, in an academically oriented household. Ellison has said she and her siblings learned Bayesian statistics in primary school, and at age 8, she gave her father an economic study of stuffed animal prices from Toys "R" Us as a birthday present.

Ellison demonstrated exceptional mathematical ability from an early age. In 2008, she received top honors in the American Mathematics Competitions. As a student at Newton North High School, she represented the United States at the 2011 International Linguistics Olympiad.

In 2016, Ellison graduated from Stanford University with a bachelor's degree in mathematics.

Career at Jane Street

After graduating from Stanford, Ellison joined Jane Street, a prominent quantitative trading firm in New York City. She spent 19 months as a junior trader, where she met Sam Bankman-Fried, who also worked at the firm. Both were part of the effective altruism movement, a philosophical community focused on using evidence and reason to do the most good.

Alameda Research

In March 2018, Ellison left Jane Street to join Alameda Research, the cryptocurrency trading firm Bankman-Fried had founded in 2017. She rose through the ranks as Alameda grew into one of the largest crypto trading operations in the world.

In October 2021, Ellison was promoted to co-CEO of Alameda Research alongside Sam Trabucco. When Trabucco stepped down in August 2022, citing burnout, Ellison became the sole CEO—a position she held when the company collapsed three months later.

Ellison was named to the Forbes 30 Under 30 list in 2022, shortly before FTX's implosion would reveal the fraud she had participated in.

Indictment, Prosecution, and Sentencing

The Collapse of FTX

FTX's collapse began in early November 2022 when CoinDesk published a report revealing that Alameda Research's balance sheet was heavily dependent on FTT, a cryptocurrency token created by FTX. The report suggested that Alameda and FTX were more intertwined than publicly disclosed.

Binance CEO Changpeng Zhao announced plans to sell Binance's holdings of FTT, triggering a bank run on FTX. Within days, FTX could not honor customer withdrawal requests, revealing that the exchange had used customer funds to prop up Alameda Research. FTX filed for bankruptcy on November 11, 2022.

Guilty Plea

On December 19, 2022, Caroline Ellison pleaded guilty in Manhattan federal court to seven counts:

In her plea allocution, Ellison admitted to preparing false financial statements, lying to lenders, and helping to conceal the misuse of FTX customer funds.

Cooperation with Prosecutors

Ellison immediately became a cooperating witness for the government. Her cooperation was described by prosecutors as exceptional in both quality and quantity. She participated in numerous meetings with investigators, reviewed thousands of documents, and provided critical insights into the inner workings of FTX and Alameda.

At Sam Bankman-Fried's trial in October and November 2023, Ellison delivered devastating testimony over three days. She described how Bankman-Fried directed her to commit crimes, how they manipulated financial records, and how customer funds were misappropriated. She also testified about their personal relationship, which she said Bankman-Fried used to manipulate her.

Sentencing

On September 24, 2024, Judge Lewis Kaplan sentenced Caroline Ellison to two years in federal prison—far below the 110-year maximum she faced and below the federal sentencing guidelines. In explaining the sentence, Judge Kaplan praised Ellison's cooperation while noting that her crimes were serious and that some punishment was necessary to deter others.

Judge Kaplan stated that Ellison had "spilled the beans" on Bankman-Fried and that her testimony was crucial to his conviction. However, he emphasized that "there are important things for which Ms. Ellison must be held to account" and that the FTX case was "probably the greatest financial fraud perpetrated in the history of the U.S."

Ellison was also ordered to forfeit $11 billion, though the practical collectability of this amount is uncertain given her financial situation.

Prison Experience

Surrender and Designation

Caroline Ellison was ordered to surrender to federal custody on November 7, 2024. Judge Kaplan recommended that the Bureau of Prisons designate her to a minimum-security facility near Boston, where her family lives.

Ellison reported to a federal prison in Connecticut to begin serving her two-year sentence. The specific facility has been identified as FCI Danbury, which houses both minimum and low-security female inmates.

Sentence Reduction

In December 2024, The Washington Post reported that Ellison's sentence had been reduced by several months, with her new projected release date moved to July 2026. The reduction likely reflects application of good conduct time credits under the First Step Act.

Personal Life

Ellison was in an on-and-off romantic relationship with Sam Bankman-Fried from approximately 2018 to 2022. She testified at trial that the relationship was "complicated" and that Bankman-Fried could be manipulative.

Ellison was a member of the effective altruism community, which emphasizes using evidence and rational analysis to maximize positive impact. This philosophy drew both Ellison and Bankman-Fried to careers in finance, with the goal of earning money to donate to effective charities—a concept known as "earning to give."

Forbes 30 Under 30

Caroline Ellison was named to the Forbes 30 Under 30 list in 2022 for her role as co-CEO of Alameda Research. She is one of several Forbes 30 Under 30 honorees who later faced criminal prosecution, joining Elizabeth Holmes, Sam Bankman-Fried, Charlie Javice, and Martin Shkreli.

Terminology

  • Alameda Research: A cryptocurrency trading firm founded by Sam Bankman-Fried in 2017, which collapsed alongside FTX in November 2022.
  • FTX: A cryptocurrency exchange founded by Sam Bankman-Fried that filed for bankruptcy in November 2022 after being unable to honor customer withdrawal requests.
  • Effective Altruism: A philosophical movement focused on using evidence and reason to determine the most effective ways to benefit others.
  • Forfeiture: A legal process by which a convicted defendant must surrender assets obtained through or used in criminal activity.

See also

Frequently Asked Questions

Q: What did Caroline Ellison do?

Caroline Ellison was CEO of Alameda Research, a cryptocurrency trading firm that misappropriated billions of dollars in FTX customer funds. She pleaded guilty to wire fraud, securities fraud, and money laundering conspiracy for her role in one of the largest financial frauds in American history.


Q: How long is Caroline Ellison's prison sentence?

Caroline Ellison was sentenced to two years in federal prison on September 24, 2024. Her extensive cooperation with prosecutors resulted in a dramatically reduced sentence despite facing a potential term of over 100 years. She was also ordered to forfeit $11 billion.


Q: Where is Caroline Ellison incarcerated?

Caroline Ellison is incarcerated at a federal prison in Connecticut. She reported to the facility on November 7, 2024, to begin serving her two-year sentence.


Q: When will Caroline Ellison be released from prison?

Caroline Ellison's projected release date is July 2026, following a sentence reduction reported in December 2024. With good conduct credits, she may be released even earlier.


Q: Did Caroline Ellison testify against Sam Bankman-Fried?

Yes, Caroline Ellison was a key government witness whose testimony over three days was instrumental in securing Sam Bankman-Fried's conviction on all seven counts. Prosecutors and the sentencing judge praised her exceptional cooperation.


References


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