Caroline Ellison, the former CEO of Alameda Research, is advocating for a lenient sentencing outcome in connection with the collapse of FTX. Her legal team has requested that the court forego prison time, proposing instead a sentence of time served combined with supervised release.
In a recent sentencing memorandum, Ellison’s attorneys highlighted that the U.S. Probation Department has recommended a sentence of time served plus three years of supervised release, citing her substantial cooperation with authorities.
Ellison’s Testimony Key in Bankman-Fried Trial
Ellison has been instrumental in the investigation into the downfall of FTX and its founder, Sam Bankman-Fried. Her testimony was crucial in Bankman-Fried’s trial, which resulted in his conviction on seven counts of fraud and conspiracy. Bankman-Fried was sentenced to 25 years in prison in March 2024.
Alameda Research, the trading firm Ellison led, was closely linked with FTX, raising concerns over the potential misuse of customer funds and conflicts of interest due to FTX’s loans to Alameda.
Ellison’s Cooperation and Accountability
Ellison’s legal team emphasized her extensive cooperation with both the government and the FTX bankruptcy estate. They argued that her assistance has been key in recovering hundreds of millions of dollars in assets for creditors. The team maintains that her actions demonstrate accountability and pose no risk of future offenses, advocating that leniency would uphold the rule of law and recognize her cooperation.
Ellison’s sentencing is scheduled for September 24 in New York. She faces charges including wire fraud and conspiracy to commit money laundering.
Support for her leniency request has been voiced by John J. Ray III, CEO of the FTX bankruptcy estate, and Robert J. Cleary, the bankruptcy examiner. Both praised Ellison’s contributions to the investigation and asset recovery efforts.
FTX Settles $600 Million Dispute Over Robinhood Shares
In related news, FTX has reached a settlement with Emergent Technologies, a company co-founded by Bankman-Fried, over a dispute involving $600 million worth of Robinhood shares. Under the settlement, FTX will pay Emergent $14 million to cover administrative costs related to the withdrawal of its petition for 55 million Robinhood shares and cash.
The Robinhood shares, seized by the U.S. Department of Justice in January 2023 after the collapse of FTX, were repurchased by Robinhood for about $606 million in September 2023. Ownership of these shares was contested by multiple parties, including FTX, BlockFi, Bankman-Fried, and Emergent.
SEC May Challenge FTX’s Repayment Plan
The SEC has recently indicated it may contest FTX’s repayment plan if it involves using stablecoins to return funds to creditors. While the use of stablecoins is not outright illegal, SEC attorneys reserve the right to challenge such repayments if they involve U.S.-dollar pegged crypto assets.
FTX has explored various strategies to compensate creditors, including a previously shelved plan to revive the exchange. The latest proposal involves liquidating assets and settling claims based on their U.S. dollar value at the time of the bankruptcy.
