Two of Sam Bankman-Fried’s key business partners — a co-founder of cryptocurrency exchange FTX and the former CEO of hedge fund Alameda Research — have pleaded guilty to fraud, a federal prosecutor in New York said Wednesday.
Former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang are working with prosecutors, the U.S. Attorney for South New York said in a video statement.
Ellison and Wang were charged “in connection with their role in the frauds that contributed to the collapse of FTX https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, said U.S. Attorney Damian Williams.
A lawsuit agreement for the criminal complaint shows that Ellison is charged with seven counts, including wire fraud and conspiracy to commit securities fraud and money laundering. In Wang’s case, the plea agreement lists four counts, including cases of wire fraud and conspiracy.
Ilan Graff, Wang’s lawyer, said in an email Wednesday: “Gary has accepted responsibility for his actions and takes his obligations as a cooperating witness seriously. https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html
Ellison’s attorneys did not immediately respond to a request for comment.
Civil fraud allegations
On Wednesday, the Securities and Exchange Commission announced civil fraud charges against Ellison and Wang “for participating in a multi-year scheme to defraud FTX stock investors https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html.
They are also charged with fraud by the Commodity Futures Trading Commission.
The SEC complaint alleges that Wang “created FTX’s software code that allowed Alameda to redirect FTX customer funds https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, and Ellison used those funds to trade Alameda.
It also alleges that Ellison and Wang worked with Bankman-Fried to transfer hundreds of millions of dollars in FTX customer funds to Alameda after finding that the companies did not have enough assets to repay customers.
The SEC claimed in its complaint that since FTX was founded in May 2019, some client funds were immediately transferred to Alameda accounts.
“Billions of dollars in FTX customer funds were deposited into bank accounts controlled by Alameda this way https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, the complaint states.
The SEC said it had agreed settlements with Wang and Ellison, which are subject to court approval.
Fall of FTX
The spate of criminal and civil charges against the two top executives has brought to light new details about FTX’s demise, including the unfettered transfer of client assets from the crypto platform to Alameda, the private hedge fund that Bankman-Fried co-founded.
Bankman-Fried, 30, co-founder and former CEO of FTX, is accused of embezzling billions of dollars deposited on the giant cryptocurrency exchange that collapsed last month.
Prosecutors involved a long-standing fraud involving money funneled into Bankman-Fried’s private hedge funds.
estimated that customers have lost more than $8 billion, said the acting director of the CFTC’s Enforcement Division.
Williams, the US lawyer, said Bankman-Fried also made “tens of millions of dollars in illegal campaign contributions https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html to candidates and committees close to both Republicans and Democrats.
He was charged with eight counts, including wire fraud, conspiracy, money laundering and violating campaign finance laws.
The SEC complaint alleges that fraudulent activity began early.
“From the founding of FTX, the defendants and Bankman-Fried diverted FTX client funds to Alameda and continued to do so until FTX collapsed in November 2022 https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, the SEC complaint states.
Wie eine der größten Krypto-Börsen von Bankmilliarden in den Konkurs ging
The SEC also alleges a complex scheme to trick both investors and customers into believing that FTX has implemented strict and predictive risk mitigation.
“In truth, Bankman-Fried and Wang, with Ellison’s knowledge and consent, had exempted Alameda from risk mitigation measures and granted Alameda significant special treatment on the FTX platform, including a virtually unlimited line of credit financed by the platform’s customers https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, the SEC wrote in its complaint.
And although the complaint details Wang and Ellison’s involvement in the company’s alleged misconduct, “Bankman-Fried remained the ultimate decision maker at Alameda https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html and FTX, the SEC complaint states.
The CFTC complaint alleges that Bankman-Fried hid trade liabilities from Alameda in a customer account with FTX, “which Bankman-Fried would later describe as the account of our Korean friend https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html and/or “the strange Korean account https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html.
“As a result, it was no longer apparent in FTX’s books that Alameda had a negative balance of $8 billion on its FTX account https://cnnbreakingnews.net/wp-content/uploads/2022/12/e2809c-38.html, the complaint states.
At one time, FTX was reportedly valued at $32 billion and was considered the face of the industry. The Bankman-Fried, who trained at MIT, was hailed as a kind of crypto genius.
Williams, the US attorney, said in the Wednesday evening announcement that Bankman-Fried was in FBI custody and was being transported from the Bahamas to the US, where he was arrested on December 12.
He agreed to delivery this week and landed late Wednesday at Westchester County Airport in White Plains, New York, NBC New York reported.
Williams said Wednesday that the investigation is ongoing.