Top associates of Sam Bankman-Fried co-operate in FTX fraud case after guilty pleas

Former Alameda Research chief executive Caroline Ellison and former FTX chief technology officer Gary Wang have been charged with defrauding investors over several years

Sam Bankman-Fried is escorted out of court in the Bahamas, hours before he was extradited to the US on Wednesday. Bloomberg
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Two top associates of disgraced cryptocurrency executive Sam Bankman-Fried have pleaded guilty to criminal charges and are co-operating with US prosecutors leading the investigation into FTX’s collapse.

The US Attorney for the Southern District of New York Damian Williams said on Wednesday night that Caroline Ellison and Gary Wang had been charged “in connection with their roles in the frauds that contributed to FTX’s collapse”.

“Both Ms Ellison and Mr Wang have pleaded guilty to those charges and they are both co-operating with the Southern District of New York,” Mr Williams said.

The US Securities and Exchange Commission and Commodity Futures Trading Commission also announced separate lawsuits against Mr Wang and Ms Ellison.

The announcements came hours after Mr Bankman-Fried, FTX's co-founder and former chief executive, consented to being extradited back to the US to face several criminal charges.

He was arrested in the Bahamas last week.

Mr Bankman-Fried boarded a private plane with FBI agents bound for New York on Wednesday night and is expected to appear in federal court in Manhattan on Thursday.

“Let me reiterate a call I made last week,” Mr Williams said. “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.”

The SEC alleged Ms Ellison and Mr Wang participated in a scheme lasting several years to defraud FTX investors.

Between 2019 and 2022, Ms Ellison — at the direction of Mr Bankman-Fried — manipulated the price of FTX’s native token FTT by purchasing large quantities in the open market, according to the SEC complaint.

The agency also alleged that Ms Ellison and Mr Wang knew or should have known Mr Bankman-Fried was falsely touting FTX as a safe cryptocurrency trading platform, while at the same time improperly transferring customer funds from FTX to Alameda.

The SEC said Ms Ellison and Mr Wang are co-operating with its investigation into other potential individuals or entities tied to the misconduct at FTX.

The CFTC’s lawsuit, which also alleges fraud, accused Ms Ellison of directing Alameda to use billions of dollars of FTX funds, including customer funds, for trades on other cryptocurrency exchanges and to pay for high-risk investments.

According to a CFTC news release, Mr Wang “created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX”.

The CFTC said the two former executives didn’t contest their liability on the CFTC’s claims.

Updated: May 30, 2023, 12:28 PM