What's next for SBF ex-girlfriend Caroline Ellison?

TECHNOLOGY
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  • Caroline Ellison, former CEO of Alameda, was released on $250,000 bail after pleading guilty in the FTX case.
  • She reportedly expressed regret in court, saying, “I knew I was wrong”.
  • Cooperators can give up a high level of autonomy in hopes of a lighter sentence, legal experts said.

Caroline Ellison’s world is about to get a lot smaller since the heady days of working and living with a group of colleagues – including her ex-boyfriend, former FTX CEO Sam Bankman-Fried – in the Bahamas.

The court settlement that Ellison, who was CEO of Alameda Research, Bankman-Fried’s trading firm, and FTX co-founder Gary Wang, settled with federal prosecutors in New York to release them each in $250,000.

At a Dec. 19 hearing before those settlements were made public, Ellison told the New York federal court that oversees FTX’s criminal cases that she was “very sorry” and that she “knew I was wrong,” the Wall Street Journal reported on Friday. She also said she knew FTX essentially allowed Alameda to borrow funds from customers, according to Bloomberg.

“I understood that if Alameda’s FTX accounts had significant negative balances in any particular currency, it meant that Alameda was borrowing funds that FTX customers had deposited with the exchange,” according to a transcript of the hearing quoted by Bloomberg.

Ellison and Wang’s plea agreements do not involve the same tight surveillance imposed on Bankman-Fried, who left a New York federal court on Thursday on $250 million bail and wearing an electronic ankle bracelet. But cooperators like Ellison may still be very much tied to prosecutors and alienated from old circles as the government builds its case against Bankman-Fried.

For example, Ellison’s agreement virtually prohibits her from speaking about events involving FTX and Alameda without permission from promoters, and limits her travel to the continental United States.

Lawyers for Ellison and others at FTX and Alameda’s web likely also advised their clients not to communicate with each other during the US government’s ongoing criminal investigation, white-collar experts told Insider.

“Your day-to-day life must have changed dramatically based on these accusations and your status as a cooperator,” said Nancy DePodesta, who co-chairs the white-collar defense practice at Saul Ewing LLP and was formerly a federal prosecutor in Chicago. .

“Yes, she is still free to go about her life so to speak, with certain restrictions of course,” added DePodesta. “But her former colleagues will shy away from her because she’s cooperating.”

A lawyer for Ellison did not respond to requests for comment on Thursday.

Ellison pleaded guilty to seven counts against her in an indictment document called the information, which prosecutors released this week. The government has portrayed Ellison and Wang as active henchmen in Bankman-Fried’s alleged scheme to use funds from FTX clients to bring money into his separate company Alameda, according to a civil complaint filed Wednesday by the US Securities and Exchange Commission.

The criminal charges against Ellison, including wire fraud and conspiracy, mirror those against Bankman-Fried. But unlike his accusations, hers were not the product of a grand jury indictment, as her cooperation and appeal relieved prosecutors of taking that step.

The charges against Ellison carry a maximum sentence of 110 years if the sentences for each are cumulative. But her cooperation could earn her a much lighter sentence, perhaps even no jail time, depending on how helpful prosecutors find her help and what the judge decides.

“It would be nothing compared to what they would be exposed to if they went to trial,” said Andrey Spektor, a white-collar partner at Bryan Cave Leighton Paisner LLP and a former federal prosecutor in Brooklyn. Spektor was referring to the types of sentences that co-workers can expect.

But there is a long way to go. Bankman-Fried’s own lawsuit in the United States is just getting started, and he is due to plead on January 3.

Cooperators like Ellison and Wang usually remain in the background. They will not be sentenced until prosecutors reveal much more from their investigation and Bankman-Fried’s own fate becomes clearer.

In the meantime, Ellison and Wang are expected to continue working with investigators.

“Although we won’t see her in court anytime soon, prosecutors will likely work with her as they believe she has more information that would help them,” said Carl Tobias, a professor of law at the University of Richmond.

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