The U.S. Attorney’s Office for the Southern District of New York announced charges against former CEO of Alameda Research Caroline Ellison and the former Chief Technology Officer of FTX Trading Ltd. Zixiao “Gary” Wang Dec. 21 for their roles in a fraud scheme that contributed to the collapse of crypto trading platform FTX Trading Ltd.
The fraud charges were the result of the ongoing investigation into the alleged fraud scheme conducted by Samuel Bankman-Fried, co-founder with Wang of FTX, that contributed to FTX’s collapse and bankruptcy. Ellison and Wang plead guilty to the charges against them and are cooperating with the Southern District of New York, U.S. Attorney for the Southern District of New York Damian Williams said in a statement on Twitter.
“We continue to work around the clock, and we are far from done,” Williams said on Twitter about the investigation.
Bankman-Fried, who agreed to be extradited from the Bahamas to New York, has been indicted by the Justice Department’s Southern District of New York on charges that include “wire fraud, securities fraud, conspiracy to commit fraud, money laundering and campaign finance violations," the New York Times reported.
Most of the charges against Bankman-Fried relate to his role in the collapse and bankruptcy of FTX, but the campaign finance violation charge stems from the approximately $40 million in donations that Bankman-Fried made to political candidates during the 2022 election cycle, Slate reported.
The federal government is alleging that Bankman-Fried violated the ban on straw donations by donating “in the names of other persons," and that he violated the ban on corporate contributions by making personal donations with FTX funds, according to Slate.
His legal team, which is expected to include attorney Mark Cohen, is reportedly negotiating a bail package with federal prosecutors that would allow the disgraced crypto executive to be released on home detention and electronic monitoring, according to New York Times.
The Securities and Exchange Commission charged Ellison and Wang for participating in a multi-year scheme to defraud equity investors in the crypto trading platform, a news release said.
"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," Securities and Exchange Commission Chair Gary Gensler said in the release. "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.
"When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison and Mr. Wang left investors holding the bag," Gensler added, according to the release. "Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance."
