FTX collapse: Caroline Ellison may avoid jail time for her role.

• On Tuesday, Caroline Ellison, the star witness in the criminal case against Sam Bankman-Fried, will face her own sentencing.
• Legal experts predict that Ellison will avoid any jail time.
• Experts said that the U.S. legal system often favors shorter sentences for individuals who aid in the apprehension of more significant offenders.

On Tuesday, Caroline Ellison, the star witness in the criminal case against Sam Bankman-Fried, will face her own sentencing.

Ellison was responsible for deceiving investors, aiding in the theft of billions of dollars from FTX customers, and using those funds to fund her own investments and debts at Alameda Research, the digital asset hedge fund she led as CEO.

In the eyes of the U.S. judicial system, both Bankman-Fried and Ellison are guilty of the same crimes.

The defendant faces charges of two counts of wire fraud, two counts of conspiracy to commit wire fraud, one count of conspiracy to commit securities fraud, one count of conspiracy to commit commodities fraud, and one count of conspiracy to commit money laundering. These charges carry a statutory maximum sentence of approximately 110 years. However, the sentence will be determined based on the extent of the crimes and the criminal history of the defendant.

Legal experts predict that Ellison will avoid any jail time at Tuesday's hearing.

In November, a jury of twelve unanimously convicted Bankman-Fried of all seven criminal charges against him. In March, he was sentenced to 25 years in prison for his crypto fraud and ordered to pay $11 billion in forfeiture.

In December 2022, unlike Bankman-Fried, Ellison agreed to a plea deal and pled guilty to all charges against her. She spent the next two years cooperating with the government, regulators, and the FTX bankruptcy estate.

Despite his denial of criminal wrongdoing, Bankman-Fried is trying to get his case retried.

Lawyers for Ellison and Bankman-Fried did not immediately respond to requests for comment.

No time behind bars

The cooperation of the prosecution in white collar crimes, even in the largest financial fraud case in American history, can have a significant impact.

Former Assistant U.S. Attorney Kevin J. O'Brien, who specializes in white-collar criminal defense in New York, stated that Ellison was the most crucial of the several insiders who testified for the government.

O'Brien stated that due to her close relationship with Sam, she was able to offer a unique and personal portrait of Bankman-Fried, a character who is notoriously difficult to pin down.

The federal Probation Department has recommended "three years of supervised release" as a credit to Ellison's "extraordinary cooperation with the government" and "her otherwise unblemished record."

District Judge Lewis Kaplan is not obligated to follow the Probation Department's recommendation, but O'Brien believes that a fine, in addition to some sort of sentence, would be a fair punishment because it reflects the immense worth of Ellison's cooperation.

According to Braden Perry, a former senior trial lawyer for the Commodity Futures Trading Commission, the U.S. legal system tends to give shorter sentences to those who help bring down more significant targets.

Ellison, the third executive linked to Bankman-Fried's business, may receive 18 months in prison and three years of supervised release, according to Perry's estimate.

"Despite being deeply involved in fraudulent activities, Ellison did not have the same level of control or directorial authority as SBF, which may impact the judge's decision to impose a light sentence," Perry stated.

Encouragement to cooperate

Ellison's conviction will result in several years of supervised release and community service, with restrictions on trading in both crypto and non-crypto markets, as well as foreign travel, according to Yesha Yadav, law professor and Associate Dean at Vanderbilt University. In contrast to Bankman-Fried, who has faced criticism and been labeled a recidivist by the government, Ellison has been commended by prosecutors and by FTX CEO and bankruptcy administrator John Ray III.

Yadav stated that on the stand, she appeared to be someone who felt guilty and in pain for her actions.

Kaplan sentenced Bankman-Fried to nearly four times the maximum requested by SBF's defense team, stating that Ellison's testimony was crucial in making his decision.

Kaplan supported federal prosecutors in revoking Bankman-Fried's bail and sending him back to jail for witness tampering after he leaked private diary entries written by Ellison. Kaplan characterized the leak as an attempt to "harm" and "discredit" Ellison.

Yadav stated that Ellison experienced significant embarrassment in public for the past two years, frequently with sexist undertones.

Former federal prosecutor Paul Tuchmann stated that most judges do not send individuals to jail if they are not a danger to others in the future.

Tuchmann stated that the likelihood of Ellison causing harm through criminal behavior in the future is extremely low.

If Kaplan avoids jail time in Ellison's sentence, it could positively impact the sentencing of Nishad Singh and Gary Wang, who will be sentenced on October 30 and November 20, respectively.

"Tuchmann stated that Judge Kaplan can afford to give no prison time to these people if he wants to, as most judges encourage cooperation and a sentence of time served and probation is the best way to achieve that."

Sam Bankman-Fried's family on sentencing: We are devastated and will persist in our efforts to secure justice for our son.