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Two leaders of Sam Bankman-Fried’s crypto empire plead guilty to fraud

Two leaders of Sam Bankman-Fried’s crypto empire plead guilty to fraud

Two leaders of Sam Bankman-Fried's crypto empire plead guilty to fraud

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Two former top executives of Sam Bankman-Fried’s crypto trading empire have pleaded guilty to federal criminal fraud charges and are cooperating in the case against the disgraced crypto entrepreneur, the U.S. Attorney General said Wednesday evening. Southern District of New York.

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The two are Caroline Ellison, who was the chief executive of cryptocurrency trading firm Alameda Research, and Gary Wang, one of the founders of crypto exchange FTX. They were key lieutenants in Mr. Bankman-Fried’s vast business empire, which relied primarily on FTX and Alameda, companies he founded and ran.

The Securities and Exchange Commission also filed civil fraud charges against Ms. Ellison and Mr. Wang on Wednesday. The SEC said Ms. Ellison, 28, misused FTX client deposits to fund Alameda’s trading activity and that Mr. Wang, 29, created software that enabled the misappropriation of funds. The SEC case builds on civil charges filed against Mr Bankman-Fried, 30, this month.

The guilty pleas and cooperation agreements are a major step forward in the criminal fraud case against Mr Bankman-Fried, who is being held in the United States after agreeing to be extradited from the Bahamas earlier on Wednesday.

The combination of criminal and civil charges against former top executives puts Mr. Bankman-Fried in an even more perilous legal position, with the federal government saying he oversaw a years-long fraud that turned him from the one of the most powerful people in the world. the crypto industry into a criminal defendant potentially facing decades in prison.

Federal prosecutors and regulators in the United States say Mr Bankman-Fried committed fraud that diverted billions of clients’ money for other purposes, including buying real estate in the Bahamas, trading crypto to Alameda, campaign donations, and investing in other crypto. businesses. Prosecutors say he defrauded customers, investors and lenders of his crypto trading company before it filed for bankruptcy last month.

The charges have also dealt a blow to the crypto industry, which has been reeling for a year as the prices of cryptocurrencies such as Bitcoin plummeted and companies filed for bankruptcy. The collapse of FTX and accusations of fraud unsettled customers of other trading platforms, who had been assured that their money was safe and protected.

Guilty pleas by Ms. Ellison and Mr. Wang could push other former executives to cooperate with authorities in the case against Mr. Bankman-Fried, who has been charged with fraud, money laundering and campaign finance offences.

US Attorney Damian Williams said Mr Wang and Ms Ellison had been charged “in connection with their role in the fraud that contributed to the collapse of FTX”.

Mr Williams also reiterated a point he made last week when the criminal charges against Mr Bankman-Fried were announced. “If you were involved in a foul at FTX or Alameda, now is the time to get ahead,” Williams said. “We are moving fast and our patience is not eternal.”

During a two-week media blitz before his December 12 arrest, Mr Bankman-Fried claimed he had done nothing wrong and had no intention of defrauding anyone. He also claimed that he was not fully aware of what was going on at Alameda.

Mr Williams, in his statement, also said Mr Bankman-Fried was being held by the FBI and being flown back to the United States, and would be brought before a judge as soon as possible. He is expected to be arraigned in federal district court in Manhattan as early as Thursday.

Lawyers for Ms Ellison declined to comment. Ilan Graff, a lawyer for Mr. Wang, said, “Gary has accepted responsibility for his actions and takes his obligations as a cooperating witness seriously.

A spokesman for Mr. Bankman-Fried declined to comment.

In its complaint, the SEC said that Ms. Ellison, under the direction of Mr. Bankman-Fried, manipulated the price of a digital currency created by FTX, called FTT, by buying large quantities of the crypto token to support its price. .

Alameda was one of the top companies trading FTT and used the crypto token as collateral for loans it got from other big crypto firms to fund its exchanges.

Sanjay Wadhwa, Deputy Director of the SEC’s Enforcement Division, said Mr. Bankman-Fried, Ms. Ellison and Mr. Wang “actively participated in a scheme to conceal material information from FTX investors, including thanks to the efforts of Mr. Bankman-Fried and Mrs. Ellison to artificially support the value of the FTT.

Ms Ellison was a key figure in Mr Bankman-Fried’s business empire. At times, she and Mr. Bankman-Fried were romantically involved and they lived together in a five-bedroom penthouse in the Bahamas, where FTX was based.

Ms Ellison met Mr Bankman-Fried at quantitative trading firm Jane Street, where she worked after graduating from Stanford University. Both were involved in effective altruism – a community focused on using data to maximize the long-term impact of charitable giving.

Mr Bankman-Fried left Jane Street and eventually founded Alameda in 2017. Ms Ellison joined in 2018 and quickly became a member of its inner circle. She followed him to Hong Kong and took over as CEO of Alameda after Mr. Bankman-Fried founded FTX with Mr. Wang.

Even as she has become a powerful figure in the emerging crypto industry. Ms. Ellison never really believed in technology. “I think a lot of crypto projects don’t have a lot of real value,” she said on the official FTX podcast in early 2021. She got into crypto, she said explained in another episode, as she hoped to earn a lot of money to give away as part of her commitment to effective selflessness.

As FTX collapsed, Ms Ellison assembled a group of Alameda staff members who worked from the company’s Hong Kong office and confessed that the company had used customer deposits to fill a shortfall. earn in its accounts, according to a person familiar with the matter.

A former software engineer at Google, Mr. Wang, a graduate of the Massachusetts Institute of Technology, was one of Mr. Bankman-Fried’s closest confidants at FTX. The couple lived together in a luxury apartment complex in the Bahamas.

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