Two top lieutenants of ousted crypto tycoon Sam Bankman-Fried have pleaded guilty to fraud, primarily for their involvement in a scheme to divert and embezzle FTX customer funds, US Attorney Damian Williams was announced Wednesday evening.
The two individuals, Caroline Ellison, who was CEO of trading firm Alameda Research, and FTX co-founder Gary Wang, are cooperating with federal authorities as they investigate Bankman-Fried and his ruined empire.
Ilan Graff, Wang’s lawyer, said Forbes in an email that “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”
The US Securities and Exchange Commission (SEC) and Commodity Futures Commission (CFTC) also filed separate fraud charges on Wednesday, accusing Ellison of “manipulating the price of FTT” (FTX’s cryptocurrency) at the behest of Bankman-Fried — describing a “multi-year scheme” to defraud stock investors. The Securities and Exchange Commission said investigations into other entities that may have been involved in the breach are ongoing.
In the SEC case, new court documents allege that Wang “created and participated in the creation of the software code that allowed Alameda to divert FTX customer funds.” Ellison, meanwhile, “used the embezzled FTX client funds for Alameda’s trading activity.”
SEC Chairman Gary Gensler said in a statement that Ellison and Bankman-Fried “planned to manipulate the price of the FTT” as a way to “boost their home value”.
The guilty pleas of the two new suspects shed some light on the mindset of Bankman-Fried’s inner circle, which included not only Ellison and Wang, but also former FTX Engineering Director Nishad Singh, its former co-CEO FTX Digital Markets, Ryan Salame. and former Alameda Research co-CEO Sam Trabucco. Court filings recently revealed that Salame blew the whistle on FTX’s activity to Bahamian regulators.
In a series of interviews Bankman-Fried gave before his arrest in the Bahamas last week, the embattled CEO appeared to place some of the blame on his former colleagues and friends.
Earlier this month, Bankman-Fried was indicted on eight criminal counts, including money laundering and wire fraud, according to an unsealed indictment from the United States Attorney’s Office for the Southern District of New York.
The crypto startup founder initially tried to fight extradition to the US in the Bahamian capital of Nassau where he has lived for nearly two years, but agreed to waive his right to a hearing after spending several days in the island’s notorious Fox Hill prison.
Williams, the United States attorney for the Southern District of New York, also said in Wednesday’s video statement that Bankman-Fried is “now in FBI custody.”
Earlier in the week, FTX announced it would seek to recover donations the company and Bankman-Fried had made to charities, political campaigns and other causes. Bankman-Fried was also charged with violating campaign finance laws by bringing donations to politicians in other people’s names.
Attorneys for Ellison and Wang could not immediately be reached for comment.
Cyrus Farivar contributed reporting.