Bankman-Fried Allies Plead Guilty in FTX Fraud

Two allies of FTX founder Sam Bankman-Fried have pleaded guilty to fraud and are cooperating with prosecutors.

Caroline Ellison, former CEO of FTX sister firm Alameda Research, and Gary Wang, FTX’s former chief technology officer, have both pleaded guilty to fraud in connection to the collapse of the cryptocurrency exchange.

Damian Williams, the U.S. attorney for the Southern District of New York, announced plea agreements in a video posted to Twitter late Wednesday (Dec 21).

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

As for anyone else who took part in “misconduct” at FTX or Alameda, “now is the time to get ahead of it,” Williams said. “We are moving quickly and our patience is not eternal,” he said.

Bankman-Fried and Wang attended MIT together and were reportedly part of the coeducational living group Epsilon Theta, which bills itself as an alcohol-free place for activities like puzzles, playing board games and debating logic problems, according to its website.

Ellison got to know Bankman-Fried when the two worked at the Wall Street hedge fund Jane Street. The pair were reportedly in an occasional romantic relationship. Before the downfall of FTX, she and nine other FTX and Alameda colleagues lived in Bankman-Fried’s $30 million penthouse in the Bahamas.

Meanwhile, Williams announced that Bankman-Fried was in FBI custody, and would appear before a judge “as soon as possible.” The former crypto wunderkind had been in jail in the Bahamas since his arrest last week but was extradited Wednesday.

Also Wednesday, the Securities and Exchange Commission has filed charges against Ellison and Wang for their alleged role in the FTX fraud. The regulator says Ellison helped Bankman-Fried manipulate the price of FTX’s FTT token to prop up its value.

“We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading,” SEC Chairman Gary Gensler said in a news release. “When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag.”

Those charges were filed in a complaint against Bankman-Fried last week in which the SEC accused him of carrying out a “years-long” fraud against investors who gave $1.8 billion to FTX.

The SEC says Bankman-Fried used commingled FTX customers’ funds at Alameda to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”

Before his arrest, Bankman-Fried made repeated claims that he did not “knowingly commingle funds,” and has blamed the failure of FTX on “a lack of oversight” and “pretty big mistakes I’m embarrassed to have made.”