The FTX saga has taken a new turn following the guilty plea of the company’s co-founder Gary Wang and former Alameda Research co-CEO Caroline Ellison.
U.S. Attorney Damian Williams announced in a message on Wednesday that the duo pleaded guilty to federal charges in the Southern District of New York, opening a swift path for federal prosecutors to round off the FTX case.
https://twitter.com/SDNYnews/status/1605745361842327552?s=20&t=S7ikH1sz13Na95-e8rbqjA
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Wang and Ellison were indicted following the sudden collapse of FTX, a popular cryptocurrency exchange holding billions of dollars in investors’ funds. At the center of the fraud allegations that led to the implosion of the company is the co-founder and former CEO Sam Bankman-Fried, who was arrested about two weeks ago after weeks of investigation by the U.S. authorities.
Bankman-Fried has been charged with eight counts of criminal offenses by the same prosecutors who Wang and Ellison made their plea to. Wang and Ellison’s plea was signed into agreement on Monday.
Wang pleaded guilty to conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud and conspiracy to commit securities fraud. Ellison pleaded guilty to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.
Their guilty plea now makes things more difficult for Bankman-Fried, who has maintained that he committed no fraud while he was the CEO of FTX. He has blamed the company’s collapse on ignorance and oversight.
Following his arrest in Bahamas, Bankman-Fried was in court for days fighting the move by the U.S. authorities to extradite him before he made a U-turn and accepted to be extradited.
Earlier this month, the U.S. Security and Exchange Commission (SEC) filed civil charges against Bankman-Fried, alleging that he deceptively raised more than $1.8 billion from equity investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler in a statement.
Both the SEC and the Commodity Futures Trading Commission have filed charges against the three people involved.
“Bankman-Fried and Wang thus gave Alameda and Ellison carte blanche to use FTX customer assets for Alameda’s trading operations and for whatever other purposes Bankman-Fried and Ellison saw fit,” the SEC said.
The complaint further alleges that they were involved “in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang.” Ellison was singled out in the SEC complaint for engaging in artificial manipulation of FTT, FTX’s self-issued token, as part of a broader effort to boost Alameda Research’s available collateral for lending.
In an expanded complaint, the CFTC charges “Ellison with fraud and material misrepresentations in connection with the sale of digital asset commodities in interstate commerce, and charges Wang with fraud in connection with the sale of digital asset commodities in interstate commerce.”
The CFTC said in a statement that Wang and Ellison accepted the claims made against them, and that they’re cooperating with the agency’s ongoing investigation.
“Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness,” Wang’s attorney said in a statement.
Alameda Research, a crypto trading firm, was linked to multiple loans from major crypto firms that have now filed for bankruptcy protection, including Voyager Digital and BlockFi Lending. That is besides the allegation that it was illegally given $10 billion of FTX investors’ funds by Bankman-Fried.
The SEC alleges that both Ellison and Wang, in their respective roles at Alameda and FTX, abetted Bankman-Fried in allegedly defrauding FTX customers. According to the Commission, Wang created a software backdoor in FTX’s platform which allowed Alameda to divert customer funds for its own trades.