Caroline Ellison and Gary Wang: FTX Co-Founder and Ex-CEO of Hedge Fund Alameda Research Each Plead to Multiple Charges, Are Cooperating with the Fed


Two senior executives tied to collapsed cryptocurrency exchange FTX have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors, according to unsealed court records. The pair also face civil fraud charges announced Wednesday night by the Securities and Exchange Commission.

FTX co-founder Gary Wang and hedge fund Alameda Research CEO Caroline Ellison plead guilty to conspiracy and fraud for their role in the fraudulent scheme that brought down the crypto trading platform.

U.S. Attorney for the Southern District of New York Damian Williams announced the charges in a video message Wednesday night. In a brief statement, he reiterated that the investigation is still ongoing, noting that these new allegations in the case are not the last.

“Gary has accepted responsibility for his actions and has taken his obligations as a cooperating witness seriously,” said Wang’s lawyer, Elan Graff. Wang has pleaded guilty.

An attorney for Ellison could not immediately be reached for comment.

Sam Bankman-Fried uncovered the allegations en route to the United States from the Bahamas, where he was arrested last week on eight charges in what Williams called one of the largest financial frauds in U.S. history. Bankman-Fried waived his right to challenge extradition on Wednesday and boarded a plane to the United States in the evening.

Bankman-Fried is expected to appear in Manhattan court on Thursday. Prosecutors and his lawyers have been discussing a bail option that would allow him to avoid detention, people familiar with the matter told CNN.

Wang co-founded FTX with Bankman-Fried in 2019 and worked with him at his hedge fund, Alameda Research. Ellison became Alameda’s CEO in October 2021, according to court documents.

Prosecutors charged Bankman-Fried with participating in multiple fraudulent schemes. Among other things, they accused Bankman-Fried of stealing money from FTX clients to support Alameda, investing in other companies, buying luxury real estate and donating tens of millions of dollars to political campaigns.

In letters dated Sunday, Dec. 18 and signed the next day, Ellison and Wang agreed to plead guilty and cooperate with prosecutors.

Ellison pleaded guilty to seven counts, including wire fraud, conspiracy to commit money laundering, conspiracy to commit securities fraud, conspiracy to commit commodities fraud and conspiracy to commit wire fraud. She is charged with the same crimes as Bankman-Fried, in addition to the campaign finance charges.

Wang agreed to plead guilty to four counts: wire fraud, conspiracy to commit wire fraud, conspiracy to commit commodities fraud and conspiracy to commit securities fraud.

“As I said last week, this investigation is ongoing, and it’s moving very quickly,” Williams said. “I also said last week’s announcement would not be our last, and let me be clear again, neither is today.”

Federal regulators also accused Ellison and Wang of playing central roles in a years-long scheme to defraud FTX investors.

The SEC accused Ellison and Wang of actively participating in a scheme to “defraud” investors. Between 2019 and 2022, Ellison “under the direction of Bankman-Fried” manipulated the price of FTX’s security token, FTT, between 2019 and 2022, the regulator said. The SEC said the manipulation was carried out by purchasing large quantities of FTT on the open market to prop up its price.

The alleged manipulation inflated Alameda’s holdings, inflated the hedge fund’s balance sheet, and “misled” investors about FTX’s exposure, the regulator said.

“When the FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison and Mr. Wang left investors with bags,” SEC Chairman Gary Gensler said in a statement.

According to the SEC, Wang created FTX’s source code that allowed Alameda to transfer FTX client funds, and Ellison used the misappropriated funds for the hedge fund’s trading activities.

“Ellison and Wang were active participants in a scheme to defraud FTX investors and engaged in conduct that was critical to its success,” the SEC said in a release.

Source link