Two high-level associates of FTX founder Sam Bankman-Fried have pleaded guilty to fraud charges connected to the dramatic collapse of the cryptocurrency exchange.
Carolyn Ellison, the former CEO of trading firm Alameda Research, and FTX co-founder and chief technology officer Gary Wang are cooperating with an extensive investigation into criminal activities at the now-bankrupt crypto exchange FTX.
According to a charge sheet issued by the SEC, between 2019 and 2022, Ellison, under Bankman-Fried’s direction, advanced a scheme by manipulating the price of FTT, an FTX-issued crypto security token, by buying large amounts on the open market to sustain its value. This manipulation inflated the valuation of Alameda’s FTT holdings, leading to an overstated value of collateral on Alameda’s balance sheet and misleading investors about FTX’s risk exposure.
The SEC alleges that from at least May 2019 until November 2022, Bankman-Fried raised billions from investors by falsely promoting FTX as a safe trading platform with advanced risk mitigation strategies to protect customer assets, while misleadingly presenting Alameda as just another customer with no preferential treatment. In reality, Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda.
Furthermore, the SEC claims that Ellison and Wang were active participants in deceiving FTX investors and that their actions were vital to the success of the fraudulent scheme. Wang is accused of creating the software code that enabled Alameda to siphon customer funds from FTX, while Ellison allegedly used misappropriated customer funds to support Alameda’s trading activities.
“As alleged, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors,” said Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement. “By secretly diverting FTX’s customer funds to Alameda, they obscured the significant risks faced by FTX’s investors and customers.”
Bankman-Fried has been extradited from the Bahamas and is currently in FBI custody, preparing to appear in a US federal court to face his charges.
In a separate case involving illicit finance, defendants in the Wirecard scandal are shifting blame among themselves for the company’s catastrophic collapse in 2020. Lawyers for former CEO Marcus Braun are working to discredit the prosecutor’s key witness, Oliver Bellenhaus, who previously led Wirecard’s Dubai-based subsidiary. Bellenhaus has pleaded guilty and is implicating Braun as the mastermind of the fraud.
Braun’s legal representatives assert that Bellenhaus deleted critical data from servers in Dubai that could have supported the existence of the firm’s outsourced operations in Asia. Bellenhaus disputes this claim, stating he only shut down the servers after they had been audited. Additionally, questions have arisen over the transfer of funds to a private foundation in Liechtenstein, which Bellenhaus alleges was a bonus approved by Wirecard executives.