FTX and Alameda executives plead guilty to fraud as Sam Bankman-Fried is extradited to US

Billionaires

FTX logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on November 14, 2022. | Photo by Jakub Porzycki/NurPhoto via Getty Images
FTX logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on November 14, 2022. | Photo by Jakub Porzycki/NurPhoto via Getty Images

Two top lieutenants of fallen crypto mogul Sam Bankman-Fried have pleaded guilty to fraud, mainly engaging in a scheme to divert and misappropriate FTX customer funds, U.S. Attorney Damian Williams announced Wednesday night.

The two individuals, Caroline Ellison, who was CEO of the trading firm Alameda Research, and FTX co-founder Gary Wang, are cooperating with federal authorities as they investigate Bankman-Fried and his collapsed empire.

Ilan Graff, an attorney for Wang, told Forbes in an email that “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”

The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) also separately filed fraud charges on Wednesday, accusing Ellison of “manipulating the price of FTT” (FTX’s cryptocurrency) at the behest of Bankman-Fried — outlining a “multiyear scheme” to defraud equity investors. The SEC stated that investigations into other entities who may have participated in the misconduct are ongoing.

In the SEC case, new court documents state that Wang “created and participated in the creation of the software code that allowed Alameda to divert FTX customer funds.” Ellison, meanwhile, “used the misappropriated FTX customer funds for Alameda’s trading activity.”

SEC Chair Gary Gensler said in a statement that Ellison and Bankman-Fried “schemed to manipulate the price of FTT,” as a way to “prop up the value of their house of cards.”

The two new suspects’ guilty pleas provided some clarity as to the mindset of Bankman-Fried’s inner circle, which comprised not only Ellison and Wang, but also former FTX Director of Engineering Nishad Singh, former co-CEO of FTX Digital Markets Ryan Salame, and former co-CEO of Alameda Research Sam Trabucco. Court filings recently revealed that Salame blew the whistle on FTX’s activity to Bahamian regulators.

In a series of interviews granted by Bankman-Fried prior to his arrest in the Bahamas last week, the troubled CEO appeared to put some of the blame on his former colleagues and friends.

Earlier this month, Bankman-Fried was charged with eight criminal counts including money laundering and wire fraud, according to an unsealed indictment by the United States Attorney’s Office for the Southern District of New York.

The crypto startup founder initially sought to fight extradition to the U.S. in the Bahamian capital Nassau where he has lived for nearly two years, but agreed to waive his right to a hearing after spending several days in the island’s notorious Fox Hill prison.

Williams, the United States Attorney for the Southern District of New York, also said in the Wednesday video statement that Bankman-Fried was “now in FBI custody.”

Earlier in the week, FTX announced that it will be seeking to claw back donations the company and Bankman-Fried had made to charities, political campaigns, and other causes. Bankman-Fried has also been charged with violating campaign finance laws by allegedly donating to politicians under the names of other individuals.

Lawyers for Ellison and Wang could not immediately be reached for comment.

Cyrus Farivar contributed to reporting.

This article was first published on forbes.com