Caroline Ellison, former CEO of Alameda Research, is seeking leniency in her sentencing for her involvement in the collapse of the cryptocurrency exchange FTX. In a legal filing submitted on Tuesday, Ellison’s legal team urged the court to avoid imposing a prison sentence, instead advocating for a sentence of time served alongside supervised release.
Legal Team Pushes for Time Served
According to the memorandum, the U.S. Probation Department has recommended that Ellison receive time served, along with three years of supervised release, due to her extensive cooperation with authorities. Her legal representatives emphasized her critical assistance in the investigation and prosecution of FTX’s founder and former CEO, Sam Bankman-Fried, arguing that her efforts have played a vital role in advancing the case.
Ellison’s Key Role in Bankman-Fried’s Conviction
Ellison has been a central figure in the ongoing legal battles surrounding FTX’s downfall, particularly in the trial of Bankman-Fried. Her testimony was instrumental in securing his conviction on seven counts of fraud and conspiracy, resulting in Bankman-Fried’s 25-year prison sentence in March 2024.
Alameda Research, the crypto trading firm Ellison led, was closely linked to FTX, leading to widespread concerns over the misuse of customer funds and conflicts of interest. FTX had extended substantial loans to Alameda, further complicating the firm’s collapse and contributing to the legal scrutiny that followed.
Legal Team Stresses Ellison’s Cooperation and Accountability
In their filing, Ellison’s attorneys underscored her cooperation with both the U.S. government and the FTX bankruptcy estate, noting that her actions helped facilitate the recovery of hundreds of millions of dollars for creditors. They argued that Ellison had taken full responsibility for her role in the scandal and posed no risk of future offenses, highlighting that her cooperation with investigators had been pivotal.
Ellison’s legal team stressed that leniency would reinforce respect for the law and acknowledge her significant contributions to the ongoing recovery efforts. Her sentencing is scheduled for September 24 in New York, where she faces multiple charges, including wire fraud and conspiracy to commit money laundering.
Support for Leniency
Ellison’s request for leniency has received backing from key figures involved in the FTX bankruptcy case. John J. Ray III, the CEO overseeing FTX’s bankruptcy estate, and Robert J. Cleary, the appointed bankruptcy examiner, have both expressed their support for Ellison’s contributions to the investigation, praising her role in recovering assets for creditors.
FTX Settles Robinhood Shares Dispute
Meanwhile, FTX recently reached a settlement with Emergent Technologies, a company co-founded by Bankman-Fried, over a dispute involving more than $600 million in Robinhood shares. As part of the settlement, FTX agreed to pay Emergent $14 million to cover administrative expenses related to the withdrawal of its petition for 55 million Robinhood shares.
The ownership of these Robinhood shares had been contested by various parties, including FTX, BlockFi, Emergent, and Bankman-Fried himself. In January 2023, the U.S. Department of Justice seized the shares after the collapse of FTX, and they were later repurchased by Robinhood for approximately $606 million in September 2023.
SEC Warns of Potential Challenge to FTX Repayment Plan
In a related development, the U.S. Securities and Exchange Commission (SEC) has cautioned that it may challenge FTX’s proposed repayment plan for creditors. The SEC warned that if FTX’s repayment strategy involves the use of stablecoins, it could face legal challenges, though the agency clarified that repaying creditors with U.S. dollar-pegged cryptocurrencies may not be illegal outright. FTX is currently considering several options for repaying creditors, including liquidating assets and settling claims based on their value at the time of the company’s bankruptcy.
As FTX continues to navigate its complex legal and financial troubles, Ellison’s role remains central to the ongoing recovery efforts, and the outcome of her sentencing could serve as a key moment in the broader saga of FTX’s collapse.
