*

Caroline Ellison pleaded guilty to fraud and conspiracy

*

She testified for the prosecution against Bankman-Fried

*

Ellison's lawyers recommended she get no prison time

(Adds more of judge's comments during sentencing hearing)

By Luc Cohen

NEW YORK, Sept 24 (Reuters) - Former cryptocurrency

executive Caroline Ellison was sentenced on Tuesday to two years

in prison for her role in her former boyfriend Sam

Bankman-Fried's theft of $8 billion in customer funds from the

now-bankrupt FTX exchange he founded, even as the judge

recognized her extensive cooperation with prosecutors.

U.S. District Judge Lewis Kaplan said at a sentencing

hearing in Manhattan federal court that he was not comfortable

with remorse and cooperation being a "get out of jail free card"

in a case so serious. Prosecutors have called Bankman-Fried's

actions one of the biggest financial frauds in U.S. history.

Ellison, 29, pleaded guilty to seven felony counts of fraud

and conspiracy and testified as a prosecution witness in the

trial of Bankman-Fried, who was convicted of fraud and other

charges last year and is serving a 25-year prison sentence

arising from FTX's November 2022 collapse.

The crimes to which she pleaded guilty carried a maximum

sentence of 110 years in prison. Her lawyers had argued that

Ellison should get no prison time due to her cooperation, and

prosecutors sought leniency as well.

Kaplan during the hearing told Ellison she was "gravely

culpable in this fraud - there is no doubt about it," though he

said her "remarkable cooperation" represented a "fundamental

distinction" between her and Bankman-Fried.

"There's no way you're ever going to do something like this

again, I am persuaded," the judge told Ellison. "But here's the

thing: this was, if not the very greatest financial fraud ever

perpetrated in this country or anywhere else, close to it."

Ellison crossed her hands on her lap and looked down at the

defense table after the sentence was read.

Ellison earlier addressed the judge, speaking at a rapid

pace and reading from a prepared statement.

"Not a day goes by when I don't think about all the people I

hurt," said Ellison, a Stanford University graduate whose

parents and two sisters were present in court. "My brain can't

even truly comprehend the scale of the harms I've caused. That

doesn't mean I don't try."

Ellison from 2021-2022 ran Alameda Research, a

cryptocurrency-focused hedge fund Bankman-Fried founded. Ellison

said she thought about leaving Alameda many times.

"Every time I thought about it, I heard Sam's voice in my

head," Ellison told the judge.

"Ignoring that voice in my head and speaking out would have

been brave," Ellison said, beginning to choke up and sniffle.

"I'm sorry I wasn't brave."

Without recommending a specific prison term, the U.S.

Attorney's office in Manhattan, which brought the charges, urged

Kaplan to go easy on Ellison.

"I cannot overstate the importance of Ms. Ellison's

testimony in convicting Sam Bankman-Fried," prosecutor Danielle

Sassoon told the hearing.

Prosecutors said Ellison met with them about 20 times to

help them piece together FTX's unraveling and make their case

against Bankman-Fried.

"Unlike Bankman-Fried, she is not cunning. There is no

evidence she was driven by greed, or that an appetite for risk

or power was part of her nature," Sassoon said.

'HONESTY AND OPENNESS'

Anjan Sahni, Ellison's lawyer, said during the hearing that

sparing Ellison from prison time "would send a powerful message

about the value of timely, honest and full cooperation with the

government in cases of financial crime."

Sahni said Ellison spoke honestly both in interviews with

prosecutors and in her testimony about her actions and her

relationship with Bankman-Fried.

"She didn't shy away from the details, however embarrassing

they were," Sahni told the judge. "Her honesty and openness

(were) ultimately critical to the government's case."

Nishad Singh and Gary Wang, two other former FTX executives

who cooperated with prosecutors, are scheduled to be sentenced

on Oct. 30 and Nov. 20, respectively.

Bankman-Fried, 32, rode a boom in cryptocurrency prices

during the COVID pandemic to a net worth of, according to Forbes

magazine, $26 billion by October 2021. He gained prominence as a

generous donor to philanthropic causes and Democratic

politicians.

His wealth evaporated when FTX collapsed in November 2022

amid a flurry of customer withdrawals. Bankman-Fried was charged

a month later with stealing FTX customer funds to plug losses at

Alameda. Ellison pleaded guilty in December 2022.

Bankman-Fried is appealing his conviction and sentence,

arguing that Kaplan wrongly excluded evidence showing he thought

FTX had enough funds to cover customer withdrawals. In

testifying in his own defense at trial, Bankman-Fried admitted

to making mistakes while running FTX, but denied stealing money.

Ellison testified over three days at Bankman-Fried's trial,

telling the jury he directed her and others to take money from

FTX's customers without their knowledge.