Caroline Ellison, flanked by her attorneys, was sentenced to two years in prison and three years of supervised release for her role in propping up FTX and Alameda Research last week.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

24 months

Caroline Ellison was not the main character at her own sentencing hearing.

When a federal prosecutor and a defense attorney took the stand to discuss Caroline Ellison's conduct before and after the collapse of FTX, her former boss – and yes, former boyfriend – Sam Bankman-Fried took center stage.

Bankman-Fried was convicted a year ago and sentenced more than six months ago. Neither he nor any of his representatives had a role in Ellison's hearing last Tuesday. And yet, much of Ellison's actions were presented through the frame of Bankman-Fried's conduct.

Assistant U.S. Attorney Danielle Sassoon, the prosecutor who toyed with Bankman-Fried during his cross-examination last year, leading to some indelibly awkward interactions, contrasted Ellison with the FTX founder on Tuesday.

Bankman-Fried showed no remorse, while Ellison did. Bankman-Fried posed a threat, while Ellison was not a recidivism risk. Bankman-Fried masterminded FTX's sketchy actions, while Ellison merely carried out her former boss's bidding, Sassoon stressed in her opening statement.

"Your Honor had the opportunity to observe Ms. Ellison's demeanor when she testified on the stand," she said. "She was the same person who came to proffer with [the DOJ in 2022 and 2023] … just from a standpoint of demeanor, this was a sharp contrast with Bankman-Fried."

Anjan Sahni, the Wilmer Hale partner representing Ellison on the stand, spoke a bit more about Ellison as a person, but still contrasted her with Bankman-Fried. Her role at Alameda was due to Bankman-Fried, her concealing Alameda's financial situation was at the request of Bankman-Fried, indeed the central question of how Ellison came to a sentencing hearing having pled guilty to fraud and conspiracy charges came down to "why did Caroline go along with Sam Bankman-Fried," he said.

The true tragedy, Sahni said, was “how rapidly and needlessly the trajectory of Miss Ellison unraveled,” when she came into contact with Bankman-Fried.

"Over time, her whole professional and personal life revolved around Bankman-Fried," he said. Ellison’s primary concern was being “good enough” for the one-time golden boy of crypto. When he expressed romantic interest in Ellison, it was “genuinely thrilling” for her.

She had the opportunity to walk away at several points, her lawyer told the court, but she didn’t. “She could not bring herself to leave Bankman-Fried’s orbit…in hindsight, she sees it was crazy to stay.”

Ellison blinked rapidly throughout the hearing, frequently wringing her hands and wrapping her arms around herself as she listened to her attorney speak, cried as she spoke to the judge.

“At each stage of the process, it became harder and harder to extricate myself,” the 29-year-old said, her voice wavering. “I’m sorry I wasn’t brave.”

Even Judge Lewis Kaplan referenced Bankman-Fried as he read out his sentence, saying the FTX founder had Ellison's "kryptonite" and noting that the guidelines recommendation for the two were identical.

Ellison cooperated, while Bankman-Fried "denied the whole thing," he said.

“While you were greatly culpable in this fraud, no doubt about it, that remarkable cooperation…is a fundamental distinction between you and Mr. Bankman-Fried,” Kaplan said.

The judge seemed sympathetic to Ellison, and praised her extensive cooperation with prosecutors.

"You’re a very strong person in some ways, Miss Ellison. You were vulnerable and you were exploited," Kaplan said. "You are genuinely remorseful … your testimony was honest. Mr. Bankman-Fried, as I said at his sentencing, perjured himself. There's no way you're ever going to do something like this again, I am persuaded."

But her remorse, it seems, wasn’t enough to spare Ellison a custodial sentence.

“In a case this serious, to be literally a get-out-of-jail-free-card is not something I can see my way through to,” Kaplan said.

Ellison was sentenced to 24 months in prison, and will serve at least 1.5 years before being eligible for parole.

Stories you may have missed

• Candidate Harris Unlikely to Make Full-Throated Crypto Policy Before Election: Source: While Vice President and Democratic nominee Kamala Harris has made some general, broad statements about supporting digital assets, she is unlikely to get into specifics ahead of the election, Jesse Hamilton reports.
• Tornado Cash Dev Roman Storm’s Criminal Case Will Proceed to Trial, NY Judge Orders: A federal judge denied Tornado Cash developer Roman Storm's motion to dismiss a Department of Justice's case in an oral order she read over a teleconference line last week.
• Crypto PACs Dominate Ohio Senate Race, Spending $40M on Sherrod Brown's Foe: Fairshake and its affiliated political action committees have spent $40 million supporting Republican Senate nominee Bernie Moreno in his bid to unseat Senate Banking Committee Chair Sherrod Brown.
• A Fire Alarm Interrupted an Aussie Crypto Summit. The Symbolism Wasn't Missed by a Concerned Industry: Australia may push crypto companies offshore if it treats cryptocurrencies like financial products whose issuers need to be licensed, Amitoj Singh reports.

This week

Tuesday

• 01:00 UTC (+1) (9:00 p.m. EDT) The U.S. Vice Presidential debate will take place.

Elsewhere:

• (CNN) New York Mayor Eric Adams was indicted on five different counts of TK. He's pled not guilty. In the meantime, former New York Governor Andrew Cuomo is reportedly considering running for Adams' seat. Bonus: The New York Times sent a reporter on the difficult assignment of testing out the Turkish Airlines service Adams allegedly underpaid for.
• (CNN) Mike Lynch, a multimillionaire fresh off a legal victory, died in August after his yacht sank. Divers looking at the wreck now think there may be "sensitive data locked in" the yacht's safes.
• (Scientific American) Hurricane Helene hit the U.S. late last week, causing catastrophic damage to several states. Recovery and rescue efforts are still underway.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!