FTX & Alameda Execs Plead Guilty to Criminal Charges

While FTX founder Sam Bankman-Fried arrives in the US to face the prosecution for committing “one of the biggest financial frauds in US history”, his two associates have already pleaded guilty to federal charges

FTX Alameda fraud

Image: Reuters

Caroline Ellison, ex-chief executive of Alameda Research, and Gary Wang, FTX’s former chief technology officer, pleaded guilty to criminal offences similar to those Mr Bankman-Fried was charged with.

While Ms. Ellison pleaded guilty to seven counts, including wire fraud and conspiracy to commit securities fraud, Mr. Wang admitted only four counts, including wire fraud. Both executives are also cooperating with federal investigators on the case of the FTX collapse.

Besides, both Ms. Ellison and Mr. Wang agreed to settle the SEC’s and CFTC’s claims that they committed civil securities and commodities fraud. They accepted liability, with monetary penalties to be decided in the future, according to the regulators.

Meanwhile, Sam Bankman-Fried, the main defendant in the FTX legal case and its former boss, has arrived by plane in New York, extradited from the Bahamas to face fraud charges.

So far, he has denied the allegations of fraud, insisting on the “negligence” scenario. However, if the prosecutors prove their allegations, this might be one of the biggest financial frauds in US history.

FTX raised more than $1.8 billion from investors, who bought an equity stake in FTX believing that the crypto exchange had appropriate controls and risk management measures in place. According to a court filing, FTX owed its 50 largest creditors almost $3.1B at the time of bankruptcy.

"As alleged, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTX, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit."
Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement

Before his arrest, the FTX boss didn’t consider himself being guilty of fraud, stating: “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”

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