New FTX charges against Caroline Ellison, Gary Wang show US is going after deputies too



  • The executives were involved in decisions made at the crypto empire, U.S. authorities say

The guilty plea on fraud charges by two associates of FTX founder Sam Bankman-Fried paves the way for U.S. authorities to hold more of his deputies responsible for the cryptocurrency exchange’s collapse.

Caroline Ellison, who ran FTX’s sister trading firm Alameda Research, and Gary Wang, FTX’s former chief technology officer, both pleaded guilty this week to criminal offenses similar to those Mr. Bankman-Fried was charged with and are cooperating with federal investigators.

In separate actions on Wednesday, the Securities and Exchange Commission and Commodity Futures Trading Commission also sued Ms. Ellison and Mr. Wang, alleging they committed civil securities and commodities fraud. Both agreed to settle the SEC’s and CFTC’s claims and to accept liability.

Before Mr. Bankman-Fried’s own arrest last week, he said in media interviews that he had stepped away from Alameda and couldn’t explain what went wrong there or how billions of dollars of FTX customer money ended up at the trading firm.

U.S. authorities have made clear that they believe that it was Mr. Bankman-Fried who was calling the shots at the crypto empire—including at Alameda, even though Ms. Ellison was CEO. The regulators’ lawsuits reiterated their statements from last week that Mr. Bankman-Fried maintained control over Alameda’s major trading, investment and financial decisions.

Still, this week’s legal filings reinforce that authorities plan to hold his deputies accountable too. Manhattan U.S. Attorney Damian Williams called for others who participated in alleged misconduct at FTX or Alameda to come forward.

“Now is the time to get ahead of it," Mr. Williams said in a video statement Wednesday night.

The SEC and CFTC alleged this week that Ms. Ellison and Mr. Wang knew Mr. Bankman-Fried improperly diverted customer assets to Alameda. Mr. Wang, a co-founder of Alameda and FTX, created the software code that gave Alameda virtually unlimited access to FTX customer assets, the SEC said.

Ms. Ellison used these FTX customer funds for Alameda’s operations, including speculative trading strategies and repaying Alameda’s debt to third-party lenders, according to the complaint.

Ms. Ellison also actively manipulated the price of hard-to-trade FTX-issued digital asset token FTT, allowing Alameda to inflate the value of its FTT holdings and use them as collateral for undisclosed loans from FTX customers and third-party lenders, the SEC said. On at least two occasions, Mr. Bankman-Fried instructed Ms. Ellison to have Alameda purchase FTT to support its price against downward selling pressure.

Alameda received and didn’t pay for “a substantial portion of the 350 million FTT tokens that were minted" when FTX launched in July 2019, according to the SEC.


This story has been published from a wire agency feed without modifications to the text

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