FTX founder Sam Bankman-Fried’s top associates plead guilty to US charges
Two of FTX founder Sam Bankman-Fried’s closest associates have pleaded guilty to fraud and agreed to co-operate with US authorities investigating the collapse of the bankrupt cryptocurrency exchange, a federal prosecutor in Manhattan said Wednesday.
Damian Williams, the US attorney for the Southern District of New York, announced the guilty pleas and criminal charges against Caroline Ellison, former chief executive of FTX trading affiliate Alameda Research, and Zixiao “Gary” Wang, a co-founder of FTX, in a short video statement. His office had brought eight charges against Bankman-Fried last week.
The announcement from Williams comes just after a plane carrying Bankman-Fried took off from the Bahamas, where he waived his right to challenge extradition to the US. He is due to appear in a Manhattan court as soon as Thursday, where his bail request will be considered.
Ellison pleaded guilty to seven counts, including wire and securities fraud and conspiracy to commit money laundering, which carry a maximum sentence of 110 years in prison, while Wang pleaded guilty to four counts of fraud, with a maximum 50-year sentence, according to signed agreements seen by the Financial Times.
The documents said prosecutors would not oppose bail requests from both defendants under certain conditions, including posting a bond and handing in their travel documents, as they awaited formal sentencing.
Separately, the Securities and Exchange Commission and the Commodity Futures Trading Commission filed civil lawsuits against the 28-year-old Ellison and 29-year-old Wang, accusing them of fraud.
“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” said SEC chair Gary Gensler.
As chief executive of the FTX trading affiliate, Ellison “used FTX’s customer assets to pay Alameda’s debts” and diverted billions of dollars of depositors’ money to the company to fill a hole caused by a crypto market crash in May, the SEC’s complaint alleges.
The CFTC said Wang had a hand in creating some of the algorithms that underpinned FTX, which allowed Alameda “to maintain an essentially unlimited line of credit” on the exchange, giving it an “unfair advantage” over regular depositors.
“These critical code features and structural exceptions allowed Alameda to secretly and recklessly siphon FTX customer assets from the FTX platform,” the CFTC added.
Both defendants are co-operating with the SEC, the agency said. The CFTC said they were not contesting their liability.
A lawyer for Wang, Ilan Graff, said: “Gary has accepted responsibility for his actions and takes seriously his obligations as a co-operating witness.” Lawyers for Ellison did not immediately respond to requests for comment.
The US Department of Justice last week filed charges against Bankman-Fried and accused him of orchestrating “one of the biggest financial frauds in American history” by misappropriating customer assets from FTX to Alameda Research. He was arrested in the Bahamas, where he lives. He is also facing parallel civil cases from the SEC and CFTC.
Bankman-Fried stepped down as chief executive of FTX as it filed for Chapter 11 bankruptcy last month.
Williams reiterated his call for others who worked with Bankman-Fried to come forward. “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he said. “We are moving quickly and our patience is not eternal.”
A representative for Bankman-Fried declined to comment.