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Caroline Ellison gets 2 years for covering up Sam Bankman-Fried’s FTX fraud

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Caroline Ellison, former chief executive officer of Alameda Research LLC, was sentenced Tuesday for helping Sam Bankman-Fried cover up FTX's fraudulent misuse of customer funds.

Enlarge / Caroline Ellison, former chief executive officer of Alameda Research LLC, was sentenced Tuesday for helping Sam Bankman-Fried cover up FTX’s fraudulent misuse of customer funds.

Caroline Ellison was sentenced Tuesday to 24 months for her role in covering up Sam Bankman-Fried’s rampant fraud at FTX—which caused billions in customer losses.

Addressing the judge at sentencing, Ellison started out by explaining “how sorry I am” for concealing FTX’s lies, Bloomberg reported live from the hearing.

“I participated in a criminal conspiracy that ultimately stole billions of dollars from people who entrusted their money with us,” Ellison reportedly said while sniffling. “The human brain is truly bad at understanding big numbers,” she added, and “not a day goes by” that she doesn’t “think about all of the people I hurt.”

Assistant US Attorney Danielle Sassoon followed Ellison, remarking that the government recommended a lighter sentence because it was important for the court to “distinguish between the mastermind and the willing accomplice.” (Bankman-Fried got 25 years.)

US District Judge Lewis Kaplan noted that he is allowed to show Ellison leniency for providing “substantial assistance to the government.” He then confirmed that he always considered the maximum sentence she faced of 110 years to be “absurd,” considering that Ellison had no inconsistencies in her testimony and fully cooperated with the government throughout their FTX probe.

“I’ve seen a lot of cooperators in 30 years,” Kaplan said. “I’ve never seen one quite like Ms. Ellison.”

However, although Ellison was brave to tell the truth about her crimes, Ellison is “by no means free of culpability,” Kaplan said. He called Bankman-Fried her “Kryptonite” because the FTX co-founder so easily exploited such a “very strong person.” Noting that nobody gets a “get out of jail free card,” he sentenced Ellison to two years and required her to forfeit about $11 billion, Bloomberg reported.

The judge said that Ellison “can serve the sentence at a minimum-security facility,” Bloomberg reported.

Ellison was key to SBF’s quick conviction

Ellison could have faced a maximum sentence of 110 years, for misleading customers and investors as the former CEO of the cryptocurrency trading firm linked to the FTX exchange, Alameda Research. But after delivering devastatingly detailed testimony key to exposing Bankman-Fried’s many lies, the probation office had recommended a sentence of time served with three years of supervised release.

Kaplan’s sentence went further, making it likely that other co-conspirators who cooperated with the government probe will also face jail time.

Both Ellison and the US government had requested substantial leniency due to her “critical” cooperation that allowed the US to convict Bankman-Fried in record time for such a complex criminal case.

Partly because Ellison was romantically involved with Bankman-Fried and partly because she “drafted some of the most incriminating documents in the case,” US attorney Damian Williams wrote in a letter to Kaplan, she was considered “crucial to the Government’s successful prosecution of Samuel Bankman-Fried for one of the largest financial frauds in history,” Williams wrote.

Williams explained that Ellison went above and beyond to help the government probe Bankman-Fried’s fraud. Starting about a month after FTX declared bankruptcy, Ellison began cooperating with the US government’s investigation. She met about 20 times with prosecutors, digging through thousands of documents to identify and interpret key evidence that convicted her former boss and boyfriend.

“Parsing Alameda Research’s poor internal records was complicated by vague titles and unlabeled calculations on any documents reflecting misuse of customer funds,” Ellison’s sentencing memo said. Without her three-day testimony at trial, the jury would likely not have understood “Alameda’s intentionally cryptic records,” Williams wrote. Additionally, because Bankman-Fried systematically destroyed evidence, she was one of the few witnesses able to contradict Bankman-Fried’s lies by providing a timeline for how Bankman-Fried’s scheme unfolded—and she was willing to find the receipts to back it all up.

“As Alameda’s nominal CEO and Bankman-Fried’s former girlfriend, Ellison was uniquely positioned to explain not only the what and how of Bankman-Fried’s crimes, but also the why,” Williams wrote. “Ellison’s testimony was critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing.”

Further, where Bankman-Fried tried to claim that he was “well-meaning but hapless” in causing FTX’s collapse, Ellison admitted her guilt before law enforcement ever got involved, then continually “expressed genuine shame and remorse” for the harms she caused, Williams wrote.

A lighter sentence, Ellison’s sentencing memo suggested, “would incentivize people involved in a fraud to do what Caroline did: publicly disclose a fraud, immediately accept responsibility, and cooperate immediately with civil and criminal authorities.”

Williams praised Ellison as exceptionally forthcoming, even alerting the government to criminal activity that they didn’t even know about yet. He also credited her for persevering as a truth-teller “despite harsh media and public scrutiny and Bankman-Fried’s efforts to publicly weaponize her personal writings to discredit and intimidate her.”

“The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” Williams wrote.

In her sentencing memo, Ellison’s lawyers asked for no prison time, insisting that Ellison had been punished enough. Not only will she recover “nothing” from the FTX bankruptcy proceedings that she’s helping to settle, but she also is banned from working in the only industries she’s ever worked in, unlikely to ever repeat her crimes in finance and cryptocurrency sectors. She also is banned from running any public company and “has been rendered effectively unemployable in the near term by the notoriety arising from this case.”

“The reputational harm is not likely to abate any time soon,” Ellison’s sentencing memo said. “These personal, financial, and career consequences constitute substantial forms of punishment that reduce the need for the Court to order her incarceration.”

Kaplan clearly disagreed, ordering her to serve 24 months and forfeit $11 billion.

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SIM-swapping ring stole $400M in crypto from a US company, officials allege

Cryptocurrency, cryptocurrency scam, cryptocurrency scheme, cryptocurrency wallets, device fraud, Identity theft, mobile device security, Policy, sim swap, sim swapping, wire fraud / /

Undetected for years —

Scheme allegedly targeted Apple, AT&T, Verizon, and T-Mobile stores in 13 states.

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SIM-swapping ring stole $400M in crypto from a US company, officials allege

The US may have uncovered the nation’s largest “SIM swap” scheme yet, charging a Chicago man and co-conspirators with allegedly stealing $400 million in cryptocurrency by targeting over 50 victims in more than a dozen states, including one company.

A recent indictment alleged that Robert Powell—using online monikers “R,” “R$,” and “ElSwapo1″—was the “head of a SIM swapping group” called the “Powell SIM Swapping Crew.” He allegedly conspired with Indiana man Carter Rohn (aka “Carti” and “Punslayer”) and Colorado woman Emily Hernandez (allegedly aka “Em”) to gain access to victims’ devices and “carry out fraudulent SIM swap attacks” between March 2021 and April 2023.

SIM-swap attacks occur when someone fraudulently induces a wireless carrier to “reassign a cell phone number from the legitimate subscriber or user’s SIM card to a SIM card controlled by a criminal actor,” the indictment said. Once the swap occurs, the bad actor can defeat multi-factor authentication protections and access online accounts to steal data or money.

Powell’s accused crew allegedly used identification card printers to forge documents, then posed as victims visiting Apple, AT&T, Verizon, and T-Mobile retail stores in Minnesota, Illinois, Indiana, Utah, Nebraska, Colorado, Florida, Maryland, Massachusetts, Texas, New Mexico, Tennessee, Virginia, and the District of Columbia.

According to the indictment, many of the alleged victims did not suffer financial losses, but those that did were allegedly hit hard. The hardest hit appears to be an employee of a company whose AT&T device was allegedly commandeered at a Texas retail store, resulting in over $400 million being allegedly transferred from the employee’s company to co-conspirators’ financial accounts. Other individual victims allegedly lost cryptocurrency valued between $15,000 and more than $1 million.

Co-conspirators are accused of masking stolen funds, sometimes by allegedly hiding transfers in unhosted or self-hosted virtual currency wallets. If convicted, all stolen funds must be forfeited, the indictment said.

Powell has been charged with conspiracy to commit wire fraud and conspiracy to commit aggravated identity theft and access device fraud, Special Agent Brent Bledsoe said in the indictment. This Friday, Powell faces a detention hearing, where he has been ordered by the US Marshals Service to appear in person.

Powell’s attorney, Gal Pissetzky, told Ars that Powell has no comment on the indictment at this time.

SIM swaps escalating in US?

When Powell’s alleged scheme began in 2021, the FBI issued a warning, noting that criminals were increasingly using SIM-swap attacks, fueling total losses that year of $68 million.

Since then, US law enforcement has made several arrests, but none of the uncovered schemes come close to the alleged losses from the thefts Powell’s crew are being accused of.

In 2022, a Florida man, Nicholas Truglia, was sentenced to 18 months for stealing more than $20 million from a single victim. On top of forfeiting the stolen funds, Truglia was also ordered to forfeit more than $900,000 as a criminal penalty. According to security blogger Brian Krebs, Truglia was connected to a group that allegedly stole $100 million using SIM-swap attacks.

Last year, there were a few notable arrests. In October, the Department of Justice sentenced a hacker, Jordan Dave Persad, to 30 months for stealing nearly $1 million from “dozens of victims.” And in December, four Florida men received sentences between eight and 27 months for stealing more than $509,475 in SIM-swap attacks.

Ars could not find any FBI warnings since 2021 raising awareness that losses from SIM-swap attacks may be further increasing to amounts as eye-popping as the alleged losses in Powell’s case.

A DOJ official was unable to confirm if this is the biggest SIM-swapping scheme alleged in the US, directing Ars to another office. Ars will update this report with any new information the DOJ provides.

US officials seem aware that some bad actors attempting SIM-swap attacks appear to be getting bolder. Earlier this year, the Securities and Exchange Commission was targeted in an attack that commandeered the agency’s account on X, formerly known as Twitter. That attack led to a misleading X post falsely announcing the approval of bitcoin exchange-traded funds, causing a brief spike in bitcoin’s price.

To protect consumers from SIM-swap attacks, the Federal Communications Commission announced new rules last year to “require wireless providers to adopt secure methods of authenticating a customer before redirecting a customer’s phone number to a new device or provider. The new rules require wireless providers to immediately notify customers whenever a SIM change or port-out request is made on customers’ accounts and take additional steps to protect customers from SIM swap and port-out fraud.” But an Ars review found these new rules may be too vague to be effective.

In 2021, when European authorities busted a SIM-swapping ring allegedly targeting high-profile individuals worldwide, Europol advised consumers to avoid becoming targets. Tips included using multifactor authentication, resisting associating sensitive accounts with mobile phone numbers, keeping devices updated, avoiding replying to suspicious emails or callers requesting sensitive information, and limiting personal data shared online. Consumers can also request the highest security settings possible from mobile carriers and are encouraged to always use stronger, longer security PINs or passwords to protect devices.

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