WASHINGTON – Two top associates of disgraced crypto mogul Sam Bankman-Fried have pleaded guilty to criminal charges and are cooperating with United States prosecutors leading the investigation into FTX’s collapse.
The US Attorney for the Southern District of New York Damian Williams said in a statement on Wednesday night that Caroline Ellison and Gary Wang had been charged “in connection with their roles in the frauds that contributed to FTX’s collapse”.
“Both Ms Ellison and Mr Wang have pleaded guilty to those charges and they are both cooperating with the Southern District of New York,” Mr Williams said in the video statement.
The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) also announced separate lawsuits against Wang and Ellison.
The US attorney’s announcement came hours after FTX co-founder Bankman-Fried, who was arrested in the Bahamas last week, consented to being extradited back to the US to face several criminal charges.
He boarded a private plane with Federal Bureau of Investigation agents bound for New York on Wednesday night. Bankman-Fried is expected to appear in federal court in Manhattan on Thursday.
“Let me reiterate a call I made last week,” Mr Williams said. “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal.”
The SEC alleged that Ellison, the former chief executive of Alameda Research, and Wang, a co-founder of FTX, participated in a multi-year scheme to defraud FTX investors. Between 2019 and 2022, Ellison – at the direction of Bankman-Fried – manipulated the price of FTX’s native token FTT by purchasing large quantities in the open market, according to the SEC complaint.
The agency also alleged that Ellison and Wang knew or should have known that Bankman-Fried was falsely touting FTX as a safe crypto trading platform, while at the same time improperly transferring customer funds from FTX to Alameda.
The SEC said Ellison and Wang are cooperating with its ongoing investigation into other potential individuals or entities tied to the misconduct at FTX.
CFTC’s lawsuit, which also alleges fraud, accused Ellison of directing Alameda to use billions of dollars of FTX funds, including customer funds, for trades on other crypto exchanges and to pay for high-risk investments. According to a CFTC news release, Wang – also the former chief technology officer of the firm – “created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX”.
The guilty pleas and cooperation agreements are a major advance in the criminal fraud case against Bankman-Fried.
They could push other former executives to cooperate with the authorities in the case against Bankman-Fried, who has been charged with fraud, money laundering and campaign finance offences, and could face decades in prison.
US prosecutors and regulators have said Bankman-Fried carried out a fraud that diverted billions in customer money for other uses, including buying real estate in the Bahamas, trading crypto at Alameda, making campaign donations, and investing in other crypto companies. They contend that he defrauded customers, investors and lenders to his crypto trading firm before it collapsed in bankruptcy in November.
The charges also come as a major blow to the crypto industry, which has been reeling for the past year as prices of cryptocurrencies such as Bitcoin have plunged and firms have filed for bankruptcy. BLOOMBERG, NYTIMES
