Executives from FTX and Alameda Research Plead Guilty to Charges. SBF Now in US Custody
- Bankman-Fried has no doubt been placed in a tougher legal situation after his executives pleaded guilty to federal criminal charges.
- Both Gary Wang and Caroline Ellison are said to be cooperating with authorities against their former boss.
- Bankman-Fried oversaw Alameda until 2021, when Ellison and Sam Trabucco took over.
- The SEC accused Wang of developing a software backdoor in the FTX platform that allowed Alameda to use customer money for its own trades.
According to the U.S. attorney for the Southern District of New York, two former top employees of Sam Bankman-Fried’s crypto trading empire have admitted wrongdoing and pleaded guilty to federal criminal fraud charges and are cooperating with authorities to prosecute the disgraced entrepreneur.
Gary Wang, 29, worked as a co-founder of the bankrupt cryptocurrency exchange FTX, and Caroline Ellison, 28, served as the chief executive of the crypto hedge fund Alameda Research. Both individuals served as important aides in Bankman-Fried’s financial empire, which included a well-planned international network of investments and businesses.
Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz
— US Attorney SDNY (@SDNYnews) December 22, 2022
In addition to filing criminal fraud accusations against Bankman-Fried, the Securities and Exchange Commission and the Commodity Futures Trading Commission also filed civil fraud charges against Ellison and Wang on Wednesday. The SEC said the pair were charged “for their roles in a multiyear scheme to defraud equity investors in FTX.”
Announcing the charges, SEC Chair Gary Gensler said,
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. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag.
Ellison reportedly pleaded guilty to conspiracy to commit money laundering, conspiracy to commit securities fraud, conspiracy to commit commodities fraud, two counts of conspiracy to commit wire fraud, and two counts of wire fraud.
Wang entered a guilty plea to conspiracy to commit securities fraud, conspiracy to commit commodities fraud, conspiracy to commit wire fraud, and conspiracy to commit wire fraud. Wang’s legal representative told The New York Times that “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”
Ellison and Wang were also good friends of Bankman-Fried and shared a lavish apartment in the Bahamas with the former billionaire. Bankman-Fried and Ellison were also rumored to have occasionally had romantic relationships.
The guilty pleas and the decision to cooperate with authorities represent a significant step forward in the federal prosecution of Bankman-Fried, who is currently being held in the U.S after consenting to be extradited from the Bahamas to stand trial in the Southern District of New York. U.S. Attorney Williams said Bankman-Fried will “appear in court before a judge in this district as soon as possible.”
SEC’s Gary Gensler believes the federal charges against Bankman-Fried and his lieutenants will serve as a warning to other crypto platforms. According to him,
Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance.
The crypto industry is no doubt shaken by the situation at FTX. But it remains to be seen if regulators can seize this moment to come up with a uniform regulation for the crypto industry.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
