Caroline Ellison, former chief executive officer of Alameda Research LLC, center, arrives at court in New York, US, on Tuesday, Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Caroline Ellison was the star witness in the criminal case against disgraced FTX founder Sam Bankman-Fried. On Tuesday, she will face her own sentencing.
Ellison’s role in the implosion of the crypto empire run by her former boss and ex-boyfriend Sam Bankman-Fried was to lie to investors, help steal billions of dollars from FTX customers, and subsequently re-purpose those funds toward bets and debts accrued at Alameda Research, the digital asset hedge fund she helmed as CEO.
Bankman-Fried and Ellison are both, in the eyes of the U.S. judicial system, guilty of the same crimes.
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. Those charges carry a statutory maximum sentence of around 110 years, but there’s a sliding scale that takes into account the scope of the crimes and the criminal history of the defendant.
CNBC spoke to former federal prosecutors, trial attorneys and legal experts to get their take on what may be in store for Ellison at Tuesday’s hearing. They agree that Ellison is likely to walk away without any jail time at all.
After a jury of twelve unanimously found Bankman-Fried guilty of all seven criminal charges against 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 charges against her and spent two years cooperating with the government, regulators and the FTX bankruptcy estate.
Meanwhile, Bankman-Fried continues to deny virtually all criminal wrongdoing and is attempting to get his case retried.
Lawyers for Ellison and Bankman-Fried did not immediately respond to requests for comment.
Government exhibit in the case against former FTX CEO Sam Bankman-Fried.
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.
Encouragement to cooperate
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, but Kaplan said Ellison’s testimony ultimately proved pivotal to his decision to sentence Bankman-Fried to nearly four times that.
Kaplan also sided with federal prosecutors when he revoked Bankman-Fried’s bail and sent him back to jail for witness tampering after he leaked private 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 said.
Most judges don’t like sending people to jail who aren’t a threat to harm others in the future, said former federal prosecutor Paul Tuchmann.
“The chance of Ellison ever harming anyone through criminal conduct in the future again are very low,” Tuchmann said.
If Kaplan ends up foregoing jail time in Ellison’s sentence, that could bode well for former FTX engineering chief Nishad Singh and Gary Wang, the co-founder and chief technology 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,” said Tuchmann, adding 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.”
Musk had previously said in June he was leaning towards supporting DeSantis for president in 2024.
Joe Skipper | Reuters
Tesla‘s bitcoin holdings led to a big pop in reported net income for the fourth quarter because of a new rule change in how companies account for digital assets.
After showing a carrying value of $184 million in digital assets for the prior four quarters, the number suddenly jumped to $1.08 billion in the December period, Tesla reported in its earnings release on Wednesday.
The increase followed a recent policy change from the Financial Accounting Standards Board, which mandates that corporate digital asset holdings be marked to market each quarter starting at the beginning of 2025. Before the FASB rule change, companies owning bitcoin had to report their holdings at the lowest value recorded during their ownership, regardless of any subsequent price gain.
Tesla said in its earnings deck that the change resulted in an earnings per share boost of 68 cents in the quarter, and CFO Vaibhav Taneja noted on the earnings call that the net income increase was $600 million.
“It’s important to point out that the net income in Q4 was impacted by a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets,” Taneja said.
At the end of the third quarter, Tesla’s bitcoin holdings were recorded at a carrying value of $184 million, though their fair market value was significantly higher at $729 million. That means the actual increase in the value of its holdings in the period was about $347 million, reflecting bitcoin’s fourth-quarter rally.
Much of the recent gain in bitcoin is tied to optimism surrounding the second Trump administration, which was heavily backed by the crypto industry. Tesla CEO Elon Musk was Trump’s biggest financial supporter and is now a top adviser in the White House. Longtime Musk ally David Sacks was tapped by Trump to the be the White House AI and crypto czar.
Bitcoin tracking website Bitcoin Treasuries ranks Tesla as the sixth-biggest holder of bitcoin among public companies.
Tesla’s fourth-quarter earnings and revenue fell short of analysts’ expectations on Wednesday as auto revenue dropped 8% from a year earlier, yet the stock climbed in after-hours trading.
Tesla CEO Elon Musk said that “your family’s life might depend on” having solar, despite that he’s part of a US government administration that has already made it harder to get solar, and seems poised to try to make it even harder.
As part of the call, an investor asked if Tesla had given up on ramping its solar roof. The product was originally unveiled way back in 2016, and hasn’t particularly lived up to the hyped expectations of the time (especially due to some, uh, hiccups along the way).
Tesla’s answer highlighted that the roof remains a core part of its residential product portfolio, along with Powerwall, and that it draws a lot of customer interest despite it being a “premium” product (in contrast to original promises that it would cost less than a regular roof). But Tesla isn’t installing the roof itself, it says it would rather produce units to send to the roofing industry.
Then, CEO Elon Musk went into a soliloquy about the benefits of having home solar, which are true if perhaps a little overstated:
I think it looks really cool, and your house generates electricity. And if you combine it with the Tesla Powerwall battery, then you can be self sufficient, so that even if the grid turns off – even if the grid turns off for several days – your house still works. And your roof looks awesome. So it’s like, I recommend anyone who can afford it, get Tesla’s solar roof and Powerwall, your family’s life might depend on it. And just in terms of convenience, your kids are not gonna yell at you cause their computers don’t work and their power went out and they cant charge their phone. Actually happens. You literally cant even call anyone cause your phone’s out of juice.
Despite the answer being a bit rambly, there’s an important portion in there, when Musk says “your family’s life might depend on it.”
So, while Musk is wrong about climate change, he’s right that solar and batteries can increase resiliency of a home – which could, indeed, be lifesaving for that home’s residents in certain circumstances. But it’s still hyperbolic, and self-serving, to leverage these fears in order to sell a “premium” product – one which costs in the multiple tens of thousands of dollars – to fearful family members.
But then we must consider the larger context in which these words were said.
The White House’s occupant opposes solar
Unfortunately for the US, and for Elon Musk’s businesses selling renewable energy products, that three-time candidate finally managed to get more votes than his opponent (while still failing to attain a majority, and despite committing treason in 2021, for which there is a clear legal remedy). And after campaigning against solar, he’s already started attempts to marginalize it as an energy source in his first week squatting in the Oval Office.
On his first day occupying the seat on which traitors do not belong, he signed a memo stating that the US should focus on all forms of energy except wind and solar, the latter of which the company that virtually all of Musk’s wealth comes from sells.
We’re not sure what effect these directives will have, given their questionable legality and the fact that Congress is responsible for government budgets, not former reality TV hosts. But then again, it should be expected that a convicted felon would break the law again, especially if said felon shows no remorse for their illegal actions.
And Mr. Trump has ignorantly promised – inasmuch as the promises of a compulsive liar ever matter – to continue to attack this cheap, clean energy source in his quest to make life worse for Americans. Many estimate there is more nonsense to come, and given past experience with the ignoramus in question, that seems like a good bet.
But we’re talking about Elon Musk here, what does he have to do with all of this?
Elon Musk’s involvement in anti-solar actions
Elon Musk spent much of last year campaigning for Mr. Trump, despite that he made it openly clear that he wants to harm solar, the fastest-growing energy source in the US, which is cheaper and cleaner than fossil fuels. That candidate instead favors dirty, costly fossil fuel energy.
As a thank you for Musk’s massive bribes to Mr. Trump’s campaign, he has been appointed to the Department of Government Efficiency. This is not an actual department, but an advisory panel with no official authority.
It was created to be helmed by Musk and Vivek Ramaswamy, two of the supposedly most intelligent and capable republican operatives, who nevertheless were both tasked to do a job that would normally accomplished by one person (Ramaswamy has since quit or been forced out, before the job even started). The panel has a redundant mission to the already-existing Government Accountability Office – making it a redundant office to reduce redundancy (no, this is not a Monty Python sketch, this is apparently real life).
So, Musk is an official part of this administration which is making these anti-solar moves.
It’s a change from Musk’s previous statements about solar power. Even as recently as 2022, Musk has decried anti-solar moves, and yet he’s now thrown large chunks of his personal wealth and effort into a group committing several of them.
While Musk and his advisory panel haven’t necessarily been directly associated with these anti-solar actions, the idea of freezing government funds is related to the supposed purview of his department, so it would be reasonable to think that he might have some input into this.
Further, Musk has shown in the past that when an administration does something he objects to, he’s willing to leave an advisory position in protest. He did this in 2017 when Mr. Trump signaled that he wanted to pull the US out of the Paris Agreement, an action which Musk said was “not good for America or the world” and quit an advisory board that he had been on (Trump did the same thing again last week, and Musk didn’t resign his position this time, signaling his newfound spinelessness).
So – the fact that Musk has not pulled out of the administration despite these anti-solar moves, combined with the fact that he has shown disapproval through resignations before, suggests that he at least tacitly accepts these moves to make it harder for you to install solar.
So… Elon Musk says you’ll die without solar, but wants to make it harder for you to get it?
And now we get to the point of this all: if Elon Musk thinks that your family is in mortal peril if it doesn’t install solar panels, but he also seems okay with government making it harder to install solar panels, does that mean he wants you to die too?
Although, given the policies we’ve seen, which will directlyharm Tesla’s business, maybe even that latter group might reconsider how the corruption is working out for them.
If you’d like to install home solar from a company that *isn’t* working actively to harm solar adoption in the US, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
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