What Caroline Ellisons sentence means for her net worth as FTX fraudster prepares for two years in prison
As Caroline Ellison sobbed in court, she knew that the life-shattering consequences of the crimes she once thought she could get away with were about to be laid bare.
As Caroline Ellison sobbed in court, she knew that the life-shattering consequences of the crimes she once thought she could get away with were about to be laid bare.
Moments later, the former CEO of Alameda Research learned shed be spending two years in prison, a sentence far stricter than experienced observers were expecting. But what about the riches she amassed by defrauding her victims?
Ellison, the ex-girlfriend of former FTX boss Sam Bankman-Fried, had previously admitted that she conspired with him and others to steal $8 billion from customers who traded cryptocurrency on the FTX exchange.
She will likely serve out her time in a federal prison near Boston - close to where her MIT professor parents live - but Ellison will never be a financially free woman after she gets out, let alone the multi-millionaire she was before FTX collapsed in November 2022.
As part of her sentence, shes required to forfeit $11.02 billion to the US government, which has plans to redistribute that money to victims.
Mitchell Epner, a former federal prosecutor now practicing at New York law firm Kudman Trachten Aloe Posner, said this staggering amount cant be wiped away through bankruptcy.
Ellison, 29, will be paying what is essentially a never-ending bill for the rest of her life.
Former Alameda Research CEO Caroline Ellison leaves federal court in Manhattan after being sentenced to two years in prison on Tuesday
Ellisons MIT professor parents, Glenn Ellison and Sara Fisher Ellison, are pictured leaving the courthouse
She will be placed on a payment plan, which will leave her with the ability to pay for the basic needs of daily living, Epner told DailyMail.com. If she accumulates additional funds, the plan ordinarily would be adjusted to require her to pay more.
Her probation officer, per Kaplans ruling, can request any piece of her financial information at any time.
Ellison is also not allowed to make credit purchases or even apply for new lines of credit if she isnt in compliance with her installments to the government.
On a practical level, this means shell never be able to accumulate wealth in any meaningful way.
Ellisons mother, Sara Fisher Ellison, wrote a letter to the court ahead of her sentencing explaining that her daughter was in the midst of writing a romance novel.
Unlike any other citizen who writes a book, Ellison wont have the expectation of profiting.
The book is set in Edwardian England and loosely based on [Ellison’s] sister Kate’s imagined amorous exploits, to Kate’s great delight, her mother wrote.
If it ever gets published and has any commercial success, the government can easily up her installment payments based on her new income.
Ellison was seen crying throughout her sentencing hearing Tuesday
Bankman-Fried, who was found guilty at trial last year of the same charges Ellison pleaded guilty to, was also ordered to repay $11 billion on top of his 25-year sentence
Federal courts have some discretion in determining forfeiture amounts, but theyre almost always based on how much money a defendant was found to have earned from their crimes, not how much they can actually pay back, CNN reported.
Bankman-Fried, who was convicted at trial last year of the same charges Ellison pleaded guilty to, was also ordered to repay $11 billion on top of his 25-year sentence.
Thats despite him claiming he only had $100,000 left in his bank account weeks after he stepped down as CEO amid FTX going bankrupt.
The $11 billion figure the government asked for is not arbitrary; it is based on the dollar amounts the former couple outright stole or acquired through other illegal means.
In a memorandum filed before Bankman-Fried was sentenced to 25 years in March, prosecutors said $8 billion represented how much he made from wire fraud and conspiracy to commit wire fraud on FTXs customers, and the property involved in his conspiracy to launder the proceeds.
Ellison testified that much of the $8 billion in FTX customer funds were funneled to Alameda, the crypto investing firm Bankman-Fried founded, to pay back lenders who were recalling their loans in the summer of 2022
Ellison testified that much of the $8 billion in FTX customer funds were funneled to Alameda, the crypto investing firm Bankman-Fried founded, to pay back lenders who were recalling their loans in the summer of 2022.
Another $1.72 billion accounts for FTXs securities fraud - money it raised by lying to investors.
Paradigm, a crypto venture firm, lost approximately $278 million by investing into FTX and FTX US, the exchanges American affiliate.
Co-founder Matt Huang told the court at Bankman-Frieds trial: We have marked it down to zero.
A final $1.3 billion was added because thats what the government estimated Bankman-Fried (and Ellison) owed to Alamedas lenders.
Both Ellison and Bankman-Fried are unlikely to return to their once lavish lifestyle. Pictured is the $30 million, 12,000 square foot Bahamas penthouse they lived in before FTX went bust
The property boasts five bedrooms and a luxurious balcony with a pool
Similar to Ellison, its simply impossible for Bankman-Fried to ever come close to being a billionaire.
At the peak of his fame and success, his 90 percent stake in Alameda and his roughly 50 ownership of FTX made him worth $26 billion.
Theoretically, they could go after anything he makes, but the practical reality is that if he ended up with a job where he makes millions of dollars or if he has some financial windfall, they’ll go after him, according to Peter Katz, a former attorney at the Department of Justice’s fraud section.
If he goes and gets a job at 7-Eleven and makes $20 an hour he’s going to be able to live, Katz told CNN.
Either way, both fraudsters, who once lived together in a $30 million Bahamas penthouse, are almost certainly due for lifestyle downgrades after theyre out of prison.
