Two associates of FTX founder Sam Bankman-Fried reach plea deals over crypto scandal

Pair faced hefty prison sentences for role in collapse of cryptocurrency exchange

Oliver O'Connell
New York
Thursday 22 December 2022 13:14 GMT
FTX: Sam Bankman-Fried arrives back in US after extradition from Bahamas

Two of Sam Bankman-Fried’s top associates have secretly pleaded guilty to criminal charges relating to the collapse of cryptocurrency exchange FTX.

They are now cooperating with investigators, according to a federal prosecutor.

Mr Bankman-Fried, now in FBI custody, has now been extradited and was flown to the US from the Bahamas.

Carolyn Ellison, the 28-year-old former CEO of Alameda Research, a trading firm started by Mr Bankman-Fried, and Gary Wang, the 29-year-old who co-founded FTX, pleaded guilty to charges including wire fraud, securities fraud, and commodities fraud.

“They are both cooperating with the Southern District of New York,” US Attorney Damian Williams said on Wednesday night in a video statement released on social media.

He added that anyone else who participated in misconduct at FTX or Alameda should reach out to his office because “our patience is not eternal” and further criminal charges against others were possible.

The guilty pleas came as a surprise while Mr Bankman-Fried was en route to the US ahead of an appearance in a federal court in New York City on Thursday to answer charges connected to FTX’s failure.

Before Bankman-Fried was in the air, US prosecutors hadn’t publicly revealed that Ms Ellison and Mr Wang were facing potential criminal charges or that they had agreed to work with investigators.

It is not known whether Mr Bankman-Fried, who has apologised for FTX’s collapse but denied defrauding anyone, was aware of their guilty pleas or cooperation.

The two executives signed plea agreements on 19 December, partially in exchange for a promise that prosecutors would recommend a reduction in their sentences if they cooperate fully in the investigation.

Without such a deal, the pair would face hefty prison sentences. Ms Ellison, who also faces a money laundering conspiracy charge, could have been sentenced to up to 110 years in prison, and Mr Wang could get up to 50 years.

They have both been released on $250,000 bail after secret court appearances. They are not permitted to leave the continental United States.

“Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness,” said Mr Wang’s lawyer, Ilan Graff.

A lawyer for Ms Ellison did not immediately return messages seeking comment, the Associated Press reports.

The plea deals are by no way the end of the story for Ms Ellison and Mr Wang.

In a parallel civil complaint filed on Wednesday, the Securities and Exchange Commission said they were “active participants” in what it said was Mr Bankman-Fried’s scheme to defraud FTX investors and cheat its customers.

The SEC says Mr Wang created the software code that allowed Alameda to divert FTX customer funds and Ms Ellison then used the misappropriated funds for Alameda’s trading activity.

Mr Bankman-Fried was arrested last week by Bahamian authorities at the request of the US government. Prosecutors allege he played a central role in the rapid collapse of FTX and hid its problems from the public and investors.

He is accused of illegally siphoning off customer deposits on the FTX platform and using them to enable Alameda’s trading, buying of real estate, and making huge campaign donations to left-leaning US politicians.

At age 30, the founder and former CEO of FTX, once worth tens of billions of dollars on paper, is facing the prospect of spending the rest of his life in jail.

Initially denied bail by a Bahamian judge, he was held in the Bahamas’ Fox Hill prison, which has been cited by human rights activists as having poor sanitation and as being infested with rats and insects.

On Wednesday, Bahamian Attorney General Ryan Pinder said Mr Bankman-Fried had agreed to be transferred to the US.

He was seen leaving a Magistrate Court in Nassau in a dark SUV earlier on Wednesday after waiving his right to challenge the extradition.

Mr Bankman-Fried’s lawyers will be able to request that he be released on bail at his initial court appearance in the US.

With an estimated net worth of $32bn on paper, the disgraced fintech CEO grew FTX to become the second-largest cryptocurrency exchange in the world.

He has said that he did not “knowingly” misuse customers’ funds, and believes his millions of angry customers will eventually be reimbursed for their losses.

However, at a congressional hearing last week, the new FTX CEO John Ray III, who is tasked with taking the company through bankruptcy and who previously oversaw the aftermath of the collapse of Enron, bluntly disagreed, saying: “We will never get all these assets back.”

With reporting by The Associated Press

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