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FTX, Alameda execs Ellison and Wang plead guilty and are working with DoJ, SBF lands in New York to face charges

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(Kitco News) - The FTX saga took a dramatic turn late Wednesday evening, with the U.S. Department of Justice announcing that former FTX and Alameda senior executives Caroline Ellison and Gary Wang have pled guilty to fraud and are cooperating with authorities while the plane carrying the former head of both firms was airborne and en route from the Bahamas.

U.S. Attorney Damian Williams posted a brief video announcement Wednesday night announcing the guilty pleas by Ellison, the former CEO of Alameda Research, and Wang, who co-founded FTX with Sam Bankman-Fried. “Both Ms. Ellison and Mr. Wang have pled guilty to [fraud] charges, and they are both cooperating with the Southern District of New York,” Williams said.

“Let me reiterate a call that I made last week: if you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” Williams said. “We are moving quickly, and our patience is not eternal.”

Williams also announced that Bankman-Fried was in FBI custody and on his way back to the United States. “He will be transported directly to the Southern District of New York, and he will appear in court before a judge in this district as soon as possible,” Williams said. On Dec.12, the Justice Department announced that they were charging Bankman-Fried with crimes, including wire fraud, commodities fraud, money laundering and campaign finance violations, the penalties for which could total 115 years in prison.

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) also issued press releases Wednesday evening announcing additional charges against Ellison and Wang, with the SEC accusing SBF, Ellison and Wang of coordinating together in “a multiyear scheme to defraud equity investors in FTX.”

The SEC wrote that Ellison manipulated the price of FTX’s own FTT token multiple times since 2019, and that Bankman-Fried and Wang knowingly and improperly diverted FTX customer assets to Alameda. The SEC also alleges that “Ellison and Wang were active participants in the scheme to deceive FTX’s investors and engaged in conduct that was critical to its success,” with Wang creating “FTX’s software code that allowed Alameda to divert FTX customer funds, and Ellison used misappropriated FTX customer funds for Alameda’s trading activity.”

The SEC wrote that “even as it became clear that Alameda and FTX could not make customers whole, Bankman-Fried, with the knowledge of Ellison and Wang, directed hundreds of millions of dollars more in FTX customer funds to Alameda.”

The CFTC also accused Wang of creating “features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX,” as well as “other exceptions to FTX’s standard processes that allowed Alameda to have an unfair advantage when transacting on the platform, including quicker execution times and an exemption from the platform’s distinctive auto-liquidation risk management process,” which enabled Alameda “to secretly and recklessly siphon FTX customer assets from the FTX platform.”

The CFTC complaint also alleged that Ellison “directed Alameda to use billions of dollars of FTX funds, including FTX customer funds, to trade on other digital asset exchanges and to fund a variety of high-risk digital asset industry investments,” and accused her of making “deceptive public statements in her capacity as Alameda’s CEO, including statements about the supposed separation between the operations of Alameda and FTX, in order to facilitate and perpetuate the fraudulent scheme.”

Both Wang and Ellison posted bail of $250,000 and have surrendered their travel documents as they await trial. Bankman-Fried is expected to appear before a judge today, where he is also expected to request bail.

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