Lawyers representing Caroline Ellison, former co-CEO of Alameda Research, have submitted a sentencing memorandum that contends her penalty should be time served for her offenses linked to Alameda Research and FTX.
The document, which has been lightly redacted, elaborates on Ellison’s intellectual disposition, her association with Sam Bankman-Fried, and the depth of her cooperation following the companies’ collapse.
It highlights her passion for reading that originated in her youth and mentions her ongoing efforts on a mathematics textbook and a fictional novel that is unrelated to FTX or Alameda.
Additionally, the document revisits Ellison’s portrayal of her dynamic with Bankman-Fried, implying his manipulation and how he exploited existing power imbalances.
An instance illustrating Bankman-Fried’s readiness to exploit power dynamics involves the SRM tokens allocated to Ellison, where “Mr. Bankman-Fried orchestrated the transaction in such a way that Caroline could not sell or transfer the locked SRM tokens without his approval.” In another situation, “after taking on the role of co-CEO, Caroline requested to receive a share in Alameda Research, which he declined.”
Furthermore, regarding her bonus—which constituted a significant part of her compensation—“Mr. Bankman-Fried held exclusive authority to determine Caroline’s bonus. His erratic distribution of her bonuses often left Caroline feeling insecure and served as a reminder of his control. For example, in early 2022, when Caroline was due her bonus for the latter half of 2021—her inaugural bonus as co-CEO—she noted that Mr. Bankman-Fried refrained from communicating the amount or executing any payments for months, even as other employees at Alameda and FTX received theirs. This delay struck Caroline as yet another stark indication that, despite her title of ‘Co-CEO,’ all decisions at FTX and Alameda were subject to Mr. Bankman-Fried’s discretion.”
Among other examples of Bankman-Fried’s influence is the case where “after Caroline and Mr. Trabucco hired an external attorney to serve as general counsel for Alameda Research, Daniel Friedberg terminated that attorney (as Caroline understood to be on Mr. Bankman-Fried’s orders) just a few days post-arrival in the Bahamas, as that attorney had raised concerns regarding the connections between Alameda Research and FTX.”
The memorandum also suggested that Bankman-Fried pressured Ellison to remain with Alameda Research out of fear that her departure might erode confidence in the company, especially since “her co-CEO, Mr. Trabucco, was reportedly spending more time on his yacht than fulfilling his duties at Alameda Research, a detail that had been obscured to maintain confidence in the firm.”
Lastly, the memorandum underscores Ellison’s all-staff meeting shortly before the bankruptcy, during which she revealed candid insights to her team, alongside her later cooperation with criminal investigators and in the bankruptcy proceedings, supporting her plea for leniency.
She has provided information including “documents and a declaration that detail how the Bahamian Deltec Bank and Trust granted Alameda a covert line of credit estimated at about $2 billion.”
Read more: Which FTX and Alameda executives are going to prison and when?
The document further states that “she did nothing to shield herself from the fallout of FTX and Alameda Research, despite being as aware as anyone aside from Mr. Bankman-Fried about the impending consequences. Although Caroline recognized for years that Alameda Research was secretly utilizing FTX customer funds, she nonetheless retained virtually all her assets in her FTX.com account” (emphasis ours).
“Notably, Caroline refrained from transferring any of her assets from FTX.com following June 2022, by which point she was aware that Alameda Research likely could not repay its indebtedness to FTX.com. Moreover, she did not engage in any significant purchases after (or before) that time (with the exception of an early 2022 investment in Anthropic to promote AI safety). Caroline chose not to safeguard her own funds from FTX’s collapse, believing it would be unjust to protect herself while customer funds were at risk.”
The sentencing memorandum and the Probation Department assert that the mitigating circumstances and her cooperation warrant a sentence of time-served along with three years of supervised release.
Ellison’s sentencing is set for September 24th.
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