Caroline Ellison may not be sentenced to prison for her involvement in FTX downfall | collapse

Caroline Ellison was the star witness in the prison case in opposition to disgraced FTX founder Sam Bankman-Fried. On Tuesday, she is going to face her personal sentencing.

Ellison's position in the implosion of the crypto empire run by her former boss and ex-boyfriend Sam Bankman-Fried was to lie to buyers, assist steal billions of {dollars} from FTX clients, and subsequently re-purpose these funds towards bets and money owed accrued at Alameda Research, the digital asset hedge fund she helmed as CEO.

Bankman-Fried and Ellison are each, in the eyes of the U.S. judicial system, responsible of the identical crimes.

Two counts of wire fraud, two counts of conspiracy to commit wire fraud, one rely of conspiracy to commit securities fraud, one rely of conspiracy to commit commodities fraud, and one rely of conspiracy to commit cash laundering. Those costs carry a statutory most sentence of round 110 years, however there is a sliding scale that takes under consideration the scope of the crimes and the prison historical past of the defendant.

CNBC spoke to former federal prosecutors, trial attorneys and authorized consultants to get their tackle what may be in retailer for Ellison at Tuesday's listening to. They agree that Ellison is probably going to stroll away with none jail time in any respect.

After a jury of twelve unanimously discovered Bankman-Fried responsible of all seven prison costs in opposition to him in November, he was sentenced in March to 25 years for his crypto fraud and ordered to pay $11 billion in forfeiture.

Unlike Bankman-Fried, Ellison agreed to a plea deal in December 2022. She pled guilty to all costs in opposition to her and spent two years cooperating with the federal government, regulators and the FTX chapter property.

Meanwhile, Bankman-Fried continues to deny nearly all prison wrongdoing and is making an attempt to get his case retried.

Lawyers for Ellison and Bankman-Fried did not instantly reply to requests for remark.

Cooperation with the prosecution in white collar crimes, even in what has been billed as “one of the biggest financial frauds in American history,” goes a long way.

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

“Because of the closeness of her relationship to Sam, she was able to provide a personal portrait of Bankman-Fried, an elusive character to be sure, that was probably unique in the government's case,” O'Brien said.

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

While District Judge Lewis Kaplan is under no obligation to accept the Probation Department's recommendation, O'Brien said that, along with some sort of fine, that would be “a fair sentence” because it reflects the “enormous value” of Ellison's cooperation.

The U.S. legal system tends to favor reduced sentences for those who assist in bringing down higher targets, said Braden Perry, a former senior trial lawyer for the Commodity Futures Trading Commission.

At most, Perry estimates that Ellison, who is the third executive tied to Bankman-Fried's enterprise to be sentenced, faces 18 months in prison and three years of supervised release.

Though Ellison was deeply involved in the fraudulent activities, “she did not have the same control or directorial authority as SBF, which will likely influence the judge's decision about imposing a light sentence,” Perry said.

More than likely, Ellison's conviction will entail several years of supervised release and community service with a slew of attached activity restrictions, such as no trading in both crypto and non-crypto markets or foreign travel, said Yesha Yadav, law professor and Associate Dean at Vanderbilt University.

Unlike Bankman-Fried who has faced public admonition and been portrayed by the government as a recidivist character, Ellison has been praised repeatedly by prosecutors and by new FTX CEO and bankruptcy administrator John Ray III.

“On the stand, she came across as someone who felt guilt and pain at what she had done,” Yadav said.

SBF's defense team asked for no more than 6.5 years of incarceration, however Kaplan mentioned Ellison's testimony finally proved pivotal to his resolution to sentence Bankman-Fried to almost 4 instances that.

Kaplan additionally sided with federal prosecutors when he revoked Bankman-Fried's bail and despatched him again to jail for witness tampering after he leaked personal diary entries written by Ellison. Kaplan described the leak by Bankman-Fried as one designed to “hurt” and “discredit” Ellison.

Ellison “suffered very public humiliation over the last two years, often with sexist overtones,” Yadav mentioned.

Most judges do not like sending individuals to jail who aren't a menace to hurt others in the longer term, mentioned former federal prosecutor Paul Tuchmann.

“The chance of Ellison ever harming anyone through criminal conduct in the future again are very low,” Tuchmann mentioned.

If Kaplan finally ends up foregoing jail time in Ellison's sentence, that would bode effectively for former FTX engineering chief Nishad Singh and Gary Wang, the co-founder and chief expertise officer of FTX. Singh and Wang will be sentenced Oct. 30 and Nov. 20, respectively.

“I do think that if he wants to, Judge Kaplan can ‘afford' to give all of these people no prison time,” mentioned Tuchmann, including that “Most judges want to encourage people like that to cooperate, and a sentence of time served and probation is the best way to do that.”

WATCH: Sam Bankman-Fried's household on sentencing: We are heartbroken and can proceed to combat for our son