Two of FTX founder Sam Bankman-Fried’s closest colleagues have pleaded guilty to fraud and agreed to co-operate with US prosecutors and agencies investigating the collapse of the bankrupt cryptocurrency exchange.
Damian Williams, the US attorney for the Southern District of New York, whose office brought eight charges against Bankman-Fried last week, announced the new charges against Caroline Ellison, the 28-year-old former chief executive of FTX trading affiliate Alameda Research, and 29-year-old Gary Wang, a co-founder of FTX, in a short video statement on Wednesday.
Separately, the Securities and Exchange Commission and the Commodity Futures Trading Commission filed civil charges against Ellison and Wang.
“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” said SEC chair Gary Gensler.
“We further allege that Ms Ellison and Mr Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading,” Gensler added.
The CFTC said Wang had a hand in creating some of the software that underpinned FTX, and that allowed Alameda “to maintain an essentially unlimited line of credit” on the exchange, and gave the trading arm an “unfair advantage” over regular depositors.
“These critical code features and structural exceptions allowed Alameda to secretly and recklessly siphon FTX customer assets from the FTX platform,” the CFTC added.
Both defendants are co-operating with the SEC, the agency said. The CFTC said they were not contesting their liability.
Williams’ announcement came just after a plane carrying Bankman-Fried took off from the Bahamas, where he waived his right to challenge extradition to the US. He is due to appear in a Manhattan court as soon as Thursday morning.
Williams reiterated his call for others who worked with Bankman-Fried to come forward. “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he said. “We are moving quickly and our patience is not eternal.”
A representative for Bankman-Fried declined to comment.
