Caroline Ellison and Zixiao “Gary” Wang, two executives of Sam Bankman-Fried’s fallen crypto empire, have pleaded guilty to federal charges and are cooperating with prosecutors. There was news It was announced late Wednesday Damian Williams, U.S. Attorney for the Southern District of New York.
Williams did not specify the charges to which the two pled, but said the guilty pleas were related to the roles they played at FTX and its sister company, Alameda Research. Wang co-founded the FTX cryptocurrency exchange and owned 10 percent of Alameda Research. (Bankman-Fried owned the other 90 percent.) Ellison served as CEO of Alameda Research, Bankman-Fried’s trading arm.
Ellison pleaded guilty to seven charges, According to The Washington Post. She will be sentenced to 110 years in prison. WaPo He says. Wang pleaded guilty to four charges and faces up to 50 years in prison.
Bankman-Fried and Wang allegedly gave Alameda and Ellison “carte blanche” to use funds deposited by FTX customers.
At its peak, FTX moved $20 billion in daily trades, according to the CFTC. Only a select group of insiders, including Bankman-Fried and Ellison and Wang, were said to be aware of FTX’s involvement in the fraud. The lawsuits against Bankman-Fried are both criminal and civil and have been brought by the SDNY, the CFTC and the SEC. FTX client funds were allegedly used for loans to executives, the risky business of Alameda Research, political donations and lavish spending on everything from beach houses to private jets.
The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) has already filed updated civil lawsuits that include details about Wang and Ellison’s roles. “Wang, with Ellison’s knowledge and consent, exempted Alameda from the risk mitigation measures” used by FTX, according to the updated SEC complaint, giving Alameda research a “virtually unlimited ‘line of credit’.”
The SEC complaint states that “Bankman-Fried and Wang thus gave Alameda and Ellison carte blanche to use FTX client assets for Alameda’s trading activities and Bankman-Fried and Ellison saw fit.”
According to the SEC lawsuit, Ellison, acting at the behest of Bankman-Fried, borrowed billions of dollars from lenders. Those loans were backed “in significant part” by the FTT token, which was issued by FTX and provided to Alameda for free, the SEC wrote. Ellison’s job was to buy FTT tokens on various platforms to drive up the price, making FTT, which was collateral against Alameda’s loans, more valuable. That, in turn, made it possible for Alamelu to borrow more.
“As part of their deception, Caroline Ellison and Sam Bankman-Fried plan to manipulate the price of FTX, FTX’s integrated exchange crypto security token, to inflate the value of their cards” SEC Chairman Gary Gensler said in a statement.
The fraud came to light after a blockbuster CoinDesk article revealed that Alameda Research’s balance sheet consisted mostly of the FTT token, which set off a series of events that ended in FTX’s bankruptcy. At the time, Binance’s CEO Changpeng Zhao said he was selling his FTT holdings; Alameda will buy $22 a token, Ellison tweeted.
According to the CFTC complaint, Ellison and Bankman-Fried began liquidating Alameda Research’s investments in an attempt to stem the decline in FTT token prices. That’s not enough. During that period, Bankman-Fried, Ellison and a third, unnamed FTX executive expressed surprise that the price of Bitcoin had not yet fallen.
“Ellison admitted on Nov. 6 to the Finance CEO that his offer to buy his FDT holdings at $22 per token was ‘the wrong thing to tweet.'”
As panicked FTX customers began withdrawing their money from the exchange, according to the CFTC complaint, Ellison and Bankman-Fried advised the Alameda researchers to “quickly mobilize billions of dollars of capital to send to FTX in general. That was not enough.”
At a meeting on Nov. 9, Ellison told employees the truth about Alameda’s misappropriation of FTX client funds, the CFTC says.
In response to a staff question, “Ellison also agreed to that November 6 tweet “The Binance CEO offered to buy his FTT holdings at $22 per token was a ‘misleading thing to tweet’ and expressed regret,” according to the CFTC complaint.Most employees have since resigned.
FTX’s new CEO, John J. Wray, in filing for bankruptcy, said the company was worse than Enron — and he knew because he was accused of cleaning up after fraud there.
In May, when the price of crypto began to fall, lenders wanted their money back. To keep them happy, Banker-Fried advised them to send customer deposits to creditors. Ellison used the money to pay off Alameda’s debt.
“Even in November 2022, when FTX faced billions of dollars in customer withdrawal requests that it could not fulfill, Bankman-Fried and Ellison, with Wang’s knowledge, misled investors who needed money to plug the multibillion-dollar hole,” the SEC wrote in its suit.
But customer funds were also diverted From the start, the SEC wrote in its lawsuit. This was echoed by the CFTC case.
Alameda FTX captured customer funds in two ways: first, through a “line of credit” but by directing customers to deposit fiat currency into accounts controlled by Alameda. “As a result, there is no meaningful distinction between FTX client funds and Alameda’s own funds,” the SEC filing states. “Bankman-Fried and Wang thus gave Alameda and Ellison Carte Blanche Use FTX Customer Assets for Alameda’s business operations and for such other purposes as Bankman-Fried and Ellison deem appropriate.”
As the CFTC case makes clear, these apps are not authorized by customers. (This echoes allegations in the SEC’s lawsuit about how Alameda improperly used customer funds.) In fact, FTX’s terms of service expressly forbid this kind of thing, the CFTC lawsuit says. So there were administrators know It’s important to keep client assets safe and separate from other funds – crucial to establishing intent, which is critical to proving allegations of fraud.
It enabled Alameda Bankman-Fried’s “personal savings bank to purchase luxury residences, support political campaigns, and make private investments, among other uses.”
Earlier Wednesday, the Bahamas deported Sam Bankman-Fried on his way back to the United States. Williams confirmed Bankman-Fried is now in FBI custody and said she will be flown directly to New York to appear before a judge “as soon as possible.”
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