Hours after Sam Bankman-Fried was handed over to U.S. officials in the Bahamas, there was another major development in the investigation over alleged fraud at FTX. On Wednesday night, the Southern District of New York announced that former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang are cooperating with the Feds investigating Bankman-Fried’s suspected scheme to misuse billions in customer funds.
Ellison, 28, got the worse of the pair, pleading guilty to two counts of wire fraud and five conspiracy counts involving wire, securities, and commodities fraud and money laundering. Wang, 29, pleaded guilty to one count of wire fraud and conspiracy to commit wire, securities, and commodities fraud. As part of their deal with the SDNY, Ellison and Wang have agreed to “cooperate fully” with investigators and to “truthfully and completely disclose all information concerning all matters” related to FTX. According to U.S. Attorney Damian Williams, they were charged “in connection with their roles in the frauds that contributed to FTX’s collapse.”
This is obviously bad news for Bankman-Fried, who is facing two counts of wire fraud and many more conspiracy charges for orchestrating what prosecutors have called “one of the biggest financial frauds in American history.” In the last week or so, his situation has changed considerably. Ten days ago, he was planning to fight extradition to the United States from the Bahamas, where he ran FTX from a $30 million penthouse in which Wang and Ellison also lived. (Ellison also reportedly dated Bankman-Fried for a time.) But after a judge in Nassau denied his bail request — forcing him to spend a week in the cush medical block of a dilapidated prison — SBF dropped his extradition fight, apparently without telling his lawyer in the Bahamas he was doing so. By Wednesday evening, he was in U.S. custody, where his attorneys are now trying to get him out on bail. Hours after U.S. officials got him, the SDNY announced Ellison’s and Wang’s cooperation.
Ellison and Wang are also facing civil fraud charges filed by the Securities and Exchange Commission and the Commodity Futures Trading Commission. According to the charges, Ellison was directed by Bankman-Fried to manipulate the price of FTX’s house token, FTT, by purchasing “large quantities on the open market to prop up its price,” according to the SEC. This alleged scheme was key to making it look like Alameda didn’t actually lose the billions in customer funds that FTX executives secretly moved over to their hedge fund — temporarily making it seem that everything was all right with Alameda’s balance sheet. The CFTC also claimed that Ellison helped Sam Bankman-Fried make misleading statements that Alameda and FTX operated independently from each other.
“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” Williams said in the announcement of the guilty pleas. “We are moving quickly, and our patience is not eternal.”
