Caroline Ellison, former CEO of Alameda Research and co-founder of FTX with Sam Bankman-Fried, pled guilty to federal fraud charges in return for leniency.
Zixiao (Gary) Wang, another FTX co-founder, also pleaded guilty. Ellison and Bankman-Fried were charged with securities fraud, wire fraud, and conspiracy to commit securities fraud.
The two former FTX executives reportedly misled about the firm’s financial condition and its capacity to achieve revenue forecasts while concealing the fact that they had sold most of their shares to pay off debts and engage in other questionable deals.
Wang created features in the now-defunct exchange’s contract and trading platform code that allowed Alameda Research to maintain a “essentially unlimited line of credit on FTX” and gain a “unfair advantage when transacting on the platform” with faster trade execution finality and exemptions from other control parameters, according to the Commodity Futures Trading Commission (CFTC).
The CFTC noted that, “These critical code features and structural exceptions allowed Alameda to secretly and recklessly siphon FTX customer assets from the FTX platform.”
The plea agreement was reached in the Southern District of New York. Bankman-Fried, who just posted $250 million bail following his Manhattan hearing, faces eight securities fraud charges and claims of channeling funds to Alameda Research, Ellison’s crypto hedge fund.
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
Bankman-Fried and Ellison were also accused in California with one count of securities fraud and two counts of conspiracy to conduct securities fraud and wire fraud. Alameda Research was charged for its role in the conspiracy. These allegations include wire fraud, wire fraud conspiracy, and conspiracy to conduct money laundering.
“Until crypto platforms comply with time-tested securities laws, risks to investors will persist,” he said. “It remains a priority of the SEC to use all of our available tools to bring the industry into compliance,” said Gary Gensler, 33rd SEC Chair.
Wang and Ellison were also charged by the U.S. Securities and Exchange Commission for misleading FTX stock investors. Wang and Ellison’s collaboration with New York police strengthens Bankman-Fried’s case.
“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal,” warned U.S. Attorney Damian Williams in a video statement.
Bankman-Fried was accused with a multiyear scam that used billions in client funds to buy Caribbean real estate.
Source:cryptodaily
