Caroline Ellison hopes cooperation will keep her out of prison
Attorneys for Caroline Ellison, the former co-Chief Executive Officer of Alameda Research, have filed a sentencing memorandum that argues her sentence should be time served for the crimes she committed related to Alameda Research and FTX.
The lightly-redacted document discusses Ellison’s bookish nature, her relationship with Sam Bankman-Fried, and the extent of her cooperation since the failure of the firms.
It discusses her love of books that began in childhood and mentions that she has been working on a math textbook and a novel (with a story that is not tied to FTX or Alameda).
The document also reiterates Ellison’s recounting of her relationship with Bankman-Fried, which includes apparent manipulation and that he would take advantage of the power dynamics.
One example provided of Bankman-Fried’s willingness to take advantage of the power dynamics was in the SRM tokens that were given to Ellison, but “Mr. Bankman-Fried had arranged the transaction so that Caroline could not sell or transfer the locked SRM tokens without his consent.” In an additional case, “after she was appointed co-CEO, Caroline asked Mr. Bankman-Fried to be given some equity in Alameda Research, but he refused.”
Similarly, when it came to her bonus, which represented much of her compensation, “Mr. Bankman-Fried had sole discretion to set Caroline’s bonus. Mr. Bankman-Fried’s unpredictable payment of her bonuses would, at times, leave Caroline feeling vulnerable and serve as a reminder of his authority. For instance, in early 2022, when Caroline was due her bonus for the second half of 2021—her first bonus as co-CEO—she recalls that Mr. Bankman-Fried declined to inform her of the amount or make any payment for months after Caroline understood other Alameda and FTX employees received their bonuses. Caroline perceived this delay as another stark reminder that, although her title was “Co-CEO,” everything at FTX and Alameda was subject to Mr. Bankman-Fried’s whim.”
One example of Bankman-Fried’s whims is described as “when Caroline and Mr. Trabucco hired a lawyer from outside the company to serve as Alameda Research’s general counsel, Daniel Friedberg fired the attorney (on what Caroline understood to be Mr. Bankman-Fried’s behalf) a few days after he arrived in the Bahamas, because that attorney had raised questions about the links between Alameda Research and FTX.”
The document also insinuated that Bankman-Fried pressured Ellison to stay on at Alameda Research due to fears that leaving would cause confidence in Alameda to decrease, complicated by the fact that “her co-CEO, Mr. Trabucco had been spending more time on his yacht than working for Alameda Research, (though that fact had been concealed to avoid undermining confidence in Alameda).”
Finally, the document emphasizes Ellison’s all-hands meeting shortly before the bankruptcy, where she came clean to the team, and her subsequent cooperation with criminal investigators and the bankruptcy case in its argument for leniency.
Among the information she has been able to provide is the “documents and a declaration describing, in detail, how the Bahamian Deltec Bank and Trust provided Alameda with a clandestine line of credit of approximately $2 billion.”
Read more: Which FTX and Alameda executives are going to prison and when?
Additionally, the document mentions that “she did nothing to protect herself from the collapse of FTX and Alameda Research, even though she knew as well as anyone but Mr. Bankman-Fried what was likely to happen. Although Caroline was aware for years that Alameda Research was secretly using FTX customer funds, she nevertheless kept substantially all her assets in her FTX.com user account” (emphasis ours).
“Strikingly, Caroline never transferred any of her holdings off of FTX.com after June 2022, by which point she knew that Alameda Research likely could not pay back its FTX.com ‘borrowing.’ Nor did Caroline make any significant purchases after (or before) that point (other than the Anthropic investment, made in early 2022 to advance AI safety). Caroline declined to protect her own funds from FTX’s collapse because she believed it would be unfair to shield herself while FTX’s customers’ funds were in danger.”
The sentencing memorandum and the Probation Department argue that the extenuating circumstances and cooperation mean that she should receive time-served with three years of supervised release.
Ellison’s sentencing is scheduled for September 24th.
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