Two top Sam Bankman-Fried associates secretly pleaded guilty in the collapse of cryptocurrency exchange FTX. They are cooperating with investigators.
Wednesday’s announcement by a federal prosecutor was made as the digital coin entrepreneur was being flown to the U.S. in FBI custody from the Bahamas.
Carolyn Ellison, a former CEO of Alameda Research (a trading company started by Bankman-Fried), and Gary Wang (the 29-year-old co-founder of FTX), pleaded guilty. They were charged with wire fraud, securities fraud, and commodities fraud.
U.S. Attorney Damian Williams stated on Wednesday night that both parties cooperate with the Southern District of New York in a video released on social media.
He said that any other person involved in fraud should contact his office as “our patience does not last forever” and that further criminal charges could be brought against them.
As Bankman-Fried was being extradited to the United States from the Bahamas, he made surprise guilty pleas in response to charges relating to his involvement in the failure of FTX. He was scheduled to appear before a New York City federal court on Thursday.
Bankman-Fried wasn’t in the air when Ellison and Wang weren’t facing possible criminal charges. They also hadn’t made it public that they were willing to cooperate with investigators. It was unclear if Bankman-Fried (who has since apologized for FTX’s fall but denied defrauding anyone) was also present.
Ellison and Wang entered into plea agreements on Dec. 19 in exchange for the promise that prosecutors would reduce their sentences if the two of them cooperated fully in the investigation.
Ellison could spend up to 110 years in prison without such a deal. Ellison also faces money laundering conspiracy charges. Wang could be eligible for up to 50 years. After their court appearances, both were released on $250,000 bail with travel restrictions to the continental United States.
Ilan Graff, Wang’s lawyer, said that Gary has taken responsibility for his actions and is taking his obligations as a cooperating witness seriously. Ellison’s lawyer did not respond to messages seeking comment immediately.
The Securities and Exchange Commission filed a parallel civil lawsuit Wednesday alleging that Wang and Ellison were “active players” in the scheme by Bankman-Fried to defraud FTX investors and swindle its customers.
Wang developed the software code that allowed Alameda and FTX customers to divert funds. The SEC stated that Ellison used the funds to trade with Alameda.
Last week, Bankman-Fried was arrested by the Bahamian authorities at the request of the U.S. government. U.S. prosecutors claim he was a key player in the collapse of FTX and hid its problems and financial difficulties from investors and the public.
Prosecutors and the SEC allege that Bankman-Fried illegally siphoned customer deposits from the FTX platform. This money enabled Alameda to trade, buy real estate, and make large campaign donations to U.S. lawmakers.
The 30-year-old could spend his entire life in prison. Bahamian judges initially refused bail to Bankman-Fried. The former CEO and founder of FTX were once worth tens to billions on paper.
He was later held in Fox Hill prison in the Bahamas, where human rights activists cited poor sanitation and infestations with rats and insects.
Ryan Pinder, Bahamian Attorney General, stated Wednesday that Bankman-Fried has agreed to be transferred to America.
Reporters saw Bankman-Fried leave a Magistrate Court at Nassau in a dark SUV on Wednesday after he waived his right to challenge extradition.
Bankman-Fried will appear in the U.S. Courtroom for the first time. His attorney will request that he be released under bail.
With a net worth of $32billion, Bankman-Fried was among the richest people in the world. He was an influential Washington personality, contributing millions of dollars to Democratic campaigns and left-leaning causes.
FTX grew to be the second-largest cryptocurrency trading platform in the world. He stated that he didn’t “knowingly” misuse customer funds and believed his millions of angry customers would eventually be compensated.
Last week, John Ray III, the new CEO of FTX, was blunt in his denials at a congressional hearing. Ray stated that “we will never get all these assets back.”
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