Alameda’s Caroline Ellison Could Avoid Jail Time in FTX Case

Meanwhile, FTX founder Sam Bankman-Fried (SBF) is serving his 25-year prison term following a court determination in March 2024. This sentence placed him at the high end for sentence length in prominent white-collar fraud cases, begging the question — what is Caroline Ellison's fate?

Based on the sentencing memorandum submitted on Tuesday, the legal experts indicated that the US Probation Department recommended time served with three years of supervised release. However, Ellison's legal defense team wants the court to forego prison time altogether. The lawyers cited her cooperation with authorities, which led to the sentencing of Sam Bankman-Fried.

The lawyers also highlighted Ellison's role in recovering hundreds of millions of dollars in creditor assets. They said this was a demonstration of accountability, adding that leniency acknowledging her cooperation would promote respect for the law. In an interesting twist, both John Ray III, CEO of the FTX bankruptcy estate, and Robert Cleary, the bankruptcy examiner, are backing the legal team's call for leniency in Ellison's sentencing.

“Caroline Ellison's lawyers want to redact parts of her sentencing submission because she has been the focus of intense media scrutiny and Internet fascination,” legal correspondent Jacob Shamsian said.

Indeed, Ellison's testimony was pivotal during SBF's trial. On October 10, 2023, she used her time in court to secure a deal with authorities, shifting all responsibility to the FTX executive. She testified that SBF “directed” her to commit financial crimes, leading to his conviction on seven counts of fraud and conspiracy.

Ellison admitted to misappropriating billions of dollars of FTX customer funds, some of which were used to cover Alameda loans. She revealed that SBF set up systems to facilitate the theft of customer money, including a negative balance feature that allowed Alameda a $65 billion credit line. In addition, Ellison disclosed that she and SBF used mafia-like tactics to unfreeze funds stuck in two China-based exchanges.

Ellison's sentencing is scheduled for September 24 in New York. She faces charges of wire fraud and conspiracy to commit money laundering. Meanwhile, FTX is on a course to make customers whole, with stablecoin use being one of the strategies considered. However, the US SEC said it would challenge FTX's repayment plan if it involves returning funds to creditors with crypto.

The now-defunct exchange concluded its $600 million dispute with Emergent Technologies involving Robinhood shares. The US Department of Justice (DOJ) seized the shares in January 2023 after the FTX exchange's implosion in November 2022.  Robinhood later purchased the shares for approximately $606 million on September 1, 2023.

Per the settlement terms, Emergent Technologies, which SBF co-founded, will receive $14 million from FTX for administrative expenses. In exchange, the firm withdrew its petition for 55 million Robinhood shares and cash. Parties contesting over the shares include FTX, BlockFi, SBF, and Emergent Technologies.

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