Carolyn Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTX, will reportedly be working with investigators.
Two associates of Sam Bankman-Fried have pleaded guilty to criminal charges related to the collapse of cryptocurrency exchange FTX and assisting investigators with their investigation.
News of the indictment, guilty plea and the pair's cooperation in the investigation only came out after the FTX co-founder boarded a flight to the US from the Bahamas after he agreed to voluntary extradition to answer charges related to his role on the exchange. failure. The plane landed in New York at 10 pm local time.
Carolyn Ellison, former chief executive of Alameda Research, a trading firm started by Bankman-Fried, and Gary Wang, co-founder of FTX, pleaded guilty to charges "related to their role in the fraud that led to FTX's collapse", US attorney Damian Williams said on Wednesday night. The criminal charges were paired with civil lawsuits from the US Securities and Exchange Commission, alleging Ellison and Wang, as well as Sam Bankman-Fried, of securities breaches related to the group's internal "FTT". cryptocurrencies.
According to the SEC complaint, between 2019 and 2022, Ellison, "at the direction of Bankman-Fried", continued the scheme by manipulating the price of FTT, the exchange-issued crypto security token, by buying in bulk on the open market to prop up its price. FTT serves as collateral for undisclosed loans by FTX on its customer assets to Alameda, which is owned by Wang and Bankman-Fried.
The complaint underscores the picture various investigations have given of the close relationship between Alameda, which has no outside investors, and FTX. The two companies shared bank accounts and key staff members, mixed funds and the two ultimately came under Bankman-Fried's direct control, according to the complaint, despite Ellison's nominal authority, his girlfriend.
FTX quietly advanced Alameda "nearly unlimited 'lines of credit' funded by platform customers", said the SEC, though assured investors and depositors that it had "sophisticated automated risk measures" that would prevent each individual trade from losing funds. customer. Unlimited lines of credit ensured that when Alameda's bet paid off, he made a profit, but when it failed, it was FTX customers who ended up losing.
The complaint also alleges that Wang created FTX software code that allowed Alameda to divert FTX customer funds, and that Ellison used misappropriated FTX customer funds for Alameda's trading activities. Bankman-Fried previously dismissed accusations of secret "backdoors" in FTX's software noting that he "didn't even know how to code".
If the SEC complaint is upheld in court, there will likely be ramifications for the crypto industry beyond FTX. As part of its legal case, the SEC argued that the FTT, created by FTX on the promise of its holders sharing in corporate profits, was "offered and sold as an investment contract and therefore a security".
“Publicly available information makes FTT holders hopeful of a share in FTX's future growth and earnings, and of the appreciation in FTT's value,” the SEC said, arguing that cryptocurrencies violate US laws around the issuance of securities without a license. If the argument is upheld in court, it could have a significant impact on other cryptocurrencies, which thrive on regulatory uncertainty around their legal status.