FTX Co-Founder and Former Alameda Research CEO Pleads Guilty to Fraud

Co-founder of cryptocurrency exchange FTX and former CEO of Sam Bankman-Fried’s hedge fund Alameda Research plead guilty to fraud, a New York federal prosecutor said Wednesday.

Former CEO Caroline Ellison and FTX co-founder Gary Wang are both cooperating with prosecutors, the U.S. Attorney for the Southern District of New York said in a video statement.

The Securities and Exchange Commission also announced civil fraud charges Wednesday night against Ellison and Wang “for their roles in a multi-year scheme to defraud stock investors in FTX.”

The SEC’s complaint alleges that Wang “created FTX’s software code that allowed Alameda to divert FTX’s customer funds” and that Ellison used those funds for Alameda’s transactions.

It also alleges that Ellison and Wang worked with Bankman-Fried to transfer hundreds of millions of dollars of FTX client funds to Alameda after they realized the companies did not have enough assets to repay clients.

The SEC said it had agreed to settlements with Wang and Ellison, which are subject to court approval.

Bankman-Fried, 30, has been indicted and accused of embezzling billions of dollars deposited into FTX, a massive cryptocurrency exchange that collapsed last month.

Ellison and Wang were charged “in connection with their roles in the fraud that contributed to the collapse of FTX,” said US Attorney Damian Williams.

In a statement Wednesday night, he said Bankman-Fried was in FBI custody and had been brought to the U.S. from the Bahamas, where he was arrested on Dec. 12.

Bankman-Fried, the co-founder of Alameda Research, a private crypto hedge fund, agreed to be extradited from the Bahamas to the US this week.

Customers lost an estimated more than $8 billion, said the deputy director of the Commodity Futures Trading Commission’s Division of Enforcement.

An indictment against Bankman-Fried charging him with eight counts, including fraud, conspiracy, money laundering and violating campaign finance laws, was unsealed on December 13.

Prosecutors called it a year-long scam involving funneling money to his private hedge fund. Bankman-Fried also made “tens of millions of dollars in illegal campaign contributions” to candidates and committees associated with both Republicans and Democrats, Williams said.

This is a developing story. Check back for updates.

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