FTX’s Gary Wang and Alameda’s Caroline Ellison have pleaded responsible to the federal expenses and are cooperating with prosecutors
FTX co-founder Gary Wang and former Alameda Research co-CEO Caroline Ellison have both pleaded guilty to the federal charges, US Attorney for the Southern District of New York Damian Williams said on Wednesday.
Wang pleaded guilty to conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity fraud and conspiracy to commit securities fraud. Ellison pleaded guilty to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit merchandise fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.
The indictments were released the same night that former FTX CEO Sam Bankman-Fried was en route from the Bahamas to New York, where he faces eight federal criminal charges from the same prosecutors who accept pleadings from Ellison and Wang to have. The duo’s plea agreements were signed on Monday, the day Bankman-Fried was originally scheduled to return to the United States, before a court hearing in the Bahamas ended in chaos.
“As I said last week, this investigation is ongoing,” Williams said in a pre-recorded message on social media.
“I also said last week’s announcement wouldn’t be our last. And just to be clear, today’s isn’t either,” the US attorney continued.
FTX co-founder Sam Bankman-Fried is escorted out of Magistrate’s Court on December 21, 2022 in Nassau, Bahamas.
Joe Raedle | Getty Images
The SEC claimed they were “involved in a multi-year scheme to defraud investors of FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang.”
The CFTC’s expanded complaint “accuses Ellison of fraud and material misrepresentation in connection with the sale of digital asset commodities in interstate commerce and charges Wang with fraud in connection with the sale of digital asset commodities in interstate commerce.”
Wang and Ellison accepted the claims made against them, the CFTC statement said. Ellison was singled out in the SEC complaint for involvement in artificial manipulation of FTTFTX’s self-issued token, as part of a broader effort to increase Alameda Research’s available collateral for lending.
In a statement, the SEC said that Wang and Ellison have also accepted “separate settlements” in relation to the complaints and are cooperating.
Alameda Research has been associated with several loans from major crypto firms that have now filed for bankruptcy protection, including Voyager Digital and BlockFi Lending.
Williams did not provide specific details on the charges against Ellison or Wang. The SEC alleges that both Ellison and Wang, in their respective roles at Alameda and FTX, helped Bankman-Fried allegedly defraud FTX clients.
The SEC alleges that Wang created a software backdoor in FTX’s platform that allowed Alameda to divert customer funds for its own trades. Alameda was managed by Bankman-Fried until 2021, when Ellison took control along with Sam Trabucco, who left Alameda in August 2022.
Trabucco did not immediately respond to CNBC’s request for comment.
Ellison, 28, and Wang, 29, are the second and third people to be charged in connection with FTX’s billion-dollar collapse. Bankman-Fried, 30, was charged in federal court earlier this month.
“Bankman-Fried and Wang thus gave Alameda and Ellison carte blanche to use FTX client assets in Alameda’s trading operations and for any other purpose Bankman-Fried and Ellison saw fit,” the SEC said. Trabucco, who joined Alameda “in or about 2019,” according to the SEC, was not mentioned in connection with any wrongdoing.
Wang’s attorney said in a statement, “Gary has accepted responsibility for his actions and takes his duties as a cooperating witness seriously.”
Ellison’s attorney did not immediately respond to CNBC’s request for comment. A spokesman for the Bankman Fried camp declined to comment.
— CNBC’s Steven Kopack, Daniel Mangan, and Brian Schwartz contributed to this report.