Two top executives associated with collapsed cryptocurrency exchange FTX have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors, according to public court documents. In addition, the couple faces civil fraud charges from the Securities and Exchange Commission, which were announced Wednesday night.
FTX co-founder Gary Wang and Alameda Research hedge fund CEO Caroline Ellison pleaded guilty to multiple counts of conspiracy and fraud. for their role in a fraud scheme that led to the collapse of a crypto-trading platform.
US Attorney for the Southern District of New York Damian Williams announced the charges in a video message on Wednesday evening. In his brief statement, he reiterated that the investigation is still ongoing and specifically noted that these new charges in the case are not the last.
Wang’s lawyer, Ilan Graff, said: “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.” Wang has already appeared in court to plead guilty.
Ellison’s attorneys could not be reached for comment.
The charges were announced after Sam Bankman-Fried was arrested last week on an eight-count indictment in what Williams called one of the largest financial frauds in American history while traveling from the Bahamas to the United States. Bankman-Fried waived his right to contest extradition on Wednesday and boarded a plane to the United States in the early hours of the evening.
Bankman-Fried is expected to appear before a judge in Manhattan on Thursday. People familiar with the matter told CNN that prosecutors and his lawyers are discussing a bail package that would allow him to avoid jail.
Wang co-founded FTX with Bankman-Fried in 2019 and also worked with him at hedge fund Alameda Research. Ellison became Alameda’s CEO in October 2021, according to court documents.
Prosecutors allege that Bankman-Fried engaged in multiple fraud schemes. Among them, they allege that Bankman-Fried stole money from FTX clients, invested in other companies, bought luxury real estate and donated tens of millions of dollars to political campaigns to support Alameda.
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 money laundering. Except for the campaign finance charges, he is charged with the same crimes as Bankman-Fried.
Wang agreed to plead guilty to four counts: wire fraud, conspiracy to commit wire fraud, securities fraud and conspiracy to commit securities fraud.
“As I said last week, this investigation is very ongoing and moving very quickly,” Williams said. “I also said that last week’s announcement will not be our last, and again, it is not today.”
Federal regulators also accused Ellison and Wang of playing leading roles in a years-long scheme to defraud FTX investors.
The Securities and Exchange Commission alleges that Ellison and Wang actively participated in a “scheme to defraud” investors. Regulators allege that between 2019 and 2022, Ellison manipulated the price of FTX’s security token, FTT, “at the direction” of Bankman-Fried. The SEC said this manipulation was done by buying large quantities of FTT on the open market to increase its price.
Regulators say the alleged manipulation inflated Alameda’s stock, inflated the hedge fund’s balance sheet and “misled” investors about FTX’s exposure to risk.
“When the FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison and Mr. Wang left investors holding the bag,” SEC Chairman Gary Gensler said.
According to the SEC, Wang created FTX’s source code that allowed Alameda to divert FTX client funds, and Ellison used the misappropriated funds for hedge fund trading activities.
“Ellison and Wang were active participants in FTX’s scheme to defraud investors and engaged in conduct critical to its success,” the SEC said in a statement.