Two top associates of Sam Bankman-Fried have pleaded guilty to criminal charges in the collapse of the cryptocurrency exchange FTX in cooperation deals, a federal prosecutor announced Wednesday in a stunning development that came as the digital coin entrepreneur was being flown in FBI custody to the US from the Bahamas.
Carolyn Ellison, the 28-year-old former CEO of Alameda Research, a trading firm started by Bankman-Fried, and Gary Wang, the 29-year-old who co-founded FTX, pleaded guilty to charges related to their roles in the fraud that contributed to FTX’s collapse, US Attorney Damian Williams said on Wednesday night in a video statement released on social media.
They are both cooperating with the Southern District of New York, Williams said, adding that anyone else who participated in the fraud should also reach out to his office because our patience is not eternal.
He promised that his office continued to work on the case around the clock, noting that he’d said in announcing Bankman-Fried’s arrest last week that the development was not the last.
Let me be clear once again, neither is today’s, he said in an ominous signal to others who participated in the fraud.
The guilty pleas were announced as Bankman-Fried was being extradited from the Bahamas by US law enforcement to answer to charges tied to his role in FTX’s failure. He was expected to appear in a federal court in Manhattan on Thursday.
In agreements signed with prosecutors on December 19, Ellison and Wang agreed to plead guilty to charges including wire fraud, securities fraud and commodities fraud in return for leniency at sentencing if they cooperate fully.
The plea agreement signed by Ellison said that she could face up to 110 years in prison for her crimes without a cooperation deal. It called for her to testify truthfully before any grand jury or at any trial and it required her to forfeit any proceeds of her crimes.
She was released on USD 250,000 bail with travel restricted to the continental United States.
The plea deal signed by Wang said he could face up to 50 years in prison without the cooperation agreement. His agreement also requires his testimony and enabled him to be freed on USD 250,000 bail, also with travel restricted to the continental US
Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness, said Wang’s lawyer, Ilan Graff.
A lawyer for Ellison did not immediately return messages seeking comment.
In a parallel civil complaint filed Wednesday, the Securities and Exchange Commission said Wang and Ellison had conspired with Bankman-Fried in a scheme to defraud FTX investors and swindle its customers.
The SEC said Wang created the software code that allowed Alameda to divert FTX customer funds. Ellison then used the misappropriated funds for Alameda’s trading activity.
Defendants were active participants in the scheme and engaged in conduct that was critical to its success, the complaint said.
Reporters on the scene witnessed Bankman-Fried leaving a Magistrate Court in Nassau in a dark SUV earlier Wednesday after waiving his right to challenge the extradition.
The Bahamas has determined that the provisional arrest, and subsequent written consent by (Bankman-Fried) to be extradited without formal extradition proceedings satisfies the requirements of the (extradition treaty between the US and the Bahamas) and our nation’s Extradition Act, said Bahamian Attorney General Ryan Pinder, in a statement.
Bahamian authorities arrested Bankman-Fried last week at the request of the US government.
US prosecutors allege he played a central role in the rapid collapse of FTX and hid its problems from the public and investors.
The Securities and Exchange Commission said Bankman-Fried illegally used investors’ money to buy real estate on behalf of himself and his family.
The 30-year-old could potentially spend the rest of his life in jail.
Bankman-Fried was denied bail Friday after a Bahamian judge ruled that he posed a flight risk. The founder and former CEO of FTX, once worth tens of billions of dollars on paper, had been held in the Bahamas’ Fox Hill prison, which has been has been cited by human rights activists as having poor sanitation and as being infested with rats and insects.
Once he’s back in the US, Bankman-Fried’s attorney will be able to request that he be released on bail.
Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of USD 32 billion.
He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns.
FTX grew to become the second-largest cryptocurrency exchange in the world.
He has said that he did not knowingly misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
At a congressional hearing last week, the new FTX CEO John Ray III, who is tasked with taking the company through bankruptcy, bluntly disputed those assertions: We will never get all these assets back, Ray said.
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