Alameda's Caroline Ellison, FTX's Gary Wang Plead Guilty to DOJ 'Fraud' Charges, Also Settle With SEC, CFTC

FTX's Bankman-Fried was charged and arrested last week.

AccessTimeIconDec 22, 2022 at 2:17 a.m. UTC
Updated Dec 22, 2022 at 7:35 p.m. UTC
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Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pleaded guilty to charges tied to FTX's collapse, U.S. Attorney Damian Williams announced Wednesday night.

The duo are cooperating with investigators, Williams announced. The U.S. Attorney for the Southern District of New York (SDNY) did not specify what they were being charged with. Court records were not immediately available.

FTX founder Sam Bankman-Fried was charged with eight crimes by the SDNY earlier this month after he was arrested in Nassau. The charges include money laundering, wire fraud, securities fraud and campaign finance violations. He is being extradited to the U.S., Williams confirmed in his statement, saying the FTX founder was in FBI custody and would appear in court "as soon as possible."

In a statement, SEC Deputy Enforcement Director Sanjay Wadhwa said the three “were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit."

Highlighted in the complaint are multiple times when Bankman-Fried made public statements, and provided investors with documentation via audited financial statements, that Alameda received no preferential treatment from FTX.

"Given their involvement in the fraudulent scheme outlined herein, Defendants knew or were reckless in not knowing that these statements to investors were false and misleading and that they were important to FTX’s investors," the complaint reads.

"By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced,” added Wadha in a press release.

Ellison was a close confidant of Bankman-Fried's, and has been targeted by prosecutors for her role in manipulating FTX's exchange token FTT, which Alameda had used as collateral for investments. In early December Ellison, who is thought to reside in Hong Kong or Nassau, was spotted in Manhattan at a coffee shop leading many to suspect she was working with authorities.

Shortly after, Ellison retained the law firm WilmerHale to represent herself. WilmerHale counts Stephanie Avakian, a former director of the SEC’s Division of Enforcement, as one of its top attorneys.

FTX came under pressure after the CEO of crypto exchange Binance on Nov. 6 said he planned to sell his remaining holdings of FTX’s FTT token.

The SEC case noted that Ellison tweeted an offer to buy Binance's entire stake of FTT for $22, at the direction of Bankman-Fried. Other tweets from Ellison about the integrity of Alameda's balance sheet, in a response to a CoinDesk article, were also at the behest of Bankman-Fried, the complaint said.

"If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal," Williams said.

For its part, the CFTC made similar allegations against Wang and Ellison, saying Ellison committed fraud and made “material misrepresentations” tied to the FTT sales, while alleging Wang “allowed Alameda to maintain an essentially unlimited line of credit on FTX.”

UPDATE (Dec. 22, 2022, 04:39 UTC): Adds additional information throughout.

UPDATE (Dec. 22, 2022, 02:30 UTC): Adds additional information.

UPDATE (Dec. 22, 02:40 UTC): Adds SEC, CFTC charges.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

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