CFTC Charges Alameda’s Caroline Ellison in FTX Fraud

Alameda Research’s Caroline Ellison is facing more charges for her role in the FTX collapse.

The U.S. Commodity Futures Trading Commission (CFTC) said Wednesday (Dec. 21) it had charged Ellison, Alameda’s ex-CEO, with “fraud and material misrepresentations in connection with the sale of digital asset commodities in interstate commerce.”

Also charged with the same offenses is Gary Wang, FTX’s former chief technology officer. The charges came as news broke that both Wang and Ellison had pleaded guilty to fraud and agreed to cooperate with federal prosecutors in their case against Sam Bankman-Fried, FTX’s founder and former CEO.

The CFTC says Ellison and Wang “do not contest their liability” to the agency’s claims and have agreed to the entry of consent orders of judgment showing they engaged in fraud.

Bankman-Fried, 30, was arrested last week following the collapse of FTX, something that prosecutors say stemmed from a years-long fraud at the exchange.

Wang and Ellison helped with that fraud, the CFTC says, in a number of ways. In Ellison’s case, it meant directing Alameda to use billions in FTX funds — including customer funds — to trade on other crypto exchanges and fund “high-risk” digital asset investments.

“As further alleged, Ellison made deceptive public statements in her capacity as Alameda’s CEO, including statements about the supposed separation between the operations of Alameda and FTX, in order to facilitate and perpetuate the fraudulent scheme,” the CFTC said.

Wang, the commission says, “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 says Wang and other executives, acting on Bankman-Fried’s orders, created exceptions to FTX’s standard processes that gave Alameda an unfair advantage when transacting on the platform.

“These critical code features and structural exceptions allowed Alameda to secretly and recklessly siphon FTX customer assets from the FTX platform,” the CFTC said.

Ellison and Wang were also named in a complaint this week by the Securities and Exchange Commission (SEC) for their role in the FTX collapse, PYMNTS reported. The commission filed a similar complaint against Bankman-Fried last week.

SEC Chairman Gary Gensler said the two “played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading.”

“When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag,” Gensler said.