Two of Bankman-Fried's colleagues pleaded guilty to fraud

Two of Bankman-Fried's colleagues pleaded guilty to fraud
Photo by Dmitry Demidko / Unsplash

Two former colleagues of disgraced cryptocurrency mogul Sam Bankman-Fried pleaded guilty to federal criminal charges that they helped him orchestrate a multi-year scheme to defraud investors in FTX, the cryptocurrency trading platform that collapsed last month, the U.S. Attorney for the Southern District said. It was reported Wednesday by The New Yorker.

The executives -- Caroline Allison, who served as chief executive of Alameda Research, a hedge fund owned by Bankman-Fried, and Gary Wang, FTX's former chief technology officer -- are cooperating with prosecutors, Manhattan U.S. Attorney Damian Williams said.

The news came as Bankman-Fried was being transferred to New York from the Bahamas, where he spent more than a week in jail . Ellison and Wang's guilty pleas signaled a rapidly growing legal danger for Bankman-Fried as prosecutors gathered an arsenal of evidence against him.

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"We continue to work around the clock, and we are far from done," Williams said in a pre-recorded video announcement Wednesday night. He urged others involved in misconduct at Bankman-Fried's crypto empire to speak out, echoing the call he made when he announced charges against the former executive last week. A Bankman-Fried spokesman declined to comment.

Allison, who in addition to running Bankman-Fried's cryptocurrency trading firm was also his ex-girlfriend, pleaded guilty to seven counts, which reflect a large part of the Bankman-Fried indictment. Her charges include conspiracy to commit wire fraud, securities and commodities fraud, and money laundering. She faces up to 110 years in prison.

Wang, co-founder of FTX, pleaded guilty to four counts of conspiracy and fraud. He faces up to 50 years in prison.

"They are both cooperating with the Southern District of New York," Williams said.

Ilan Graff, Wang's attorney, said his client "has taken responsibility for his actions and takes his obligations as a cooperating witness seriously." Ellison's lawyer did not immediately respond to a request for comment.

Ellison and Wang, each released on $250,000 bail, signed their plea agreements and formally pleaded guilty before a Manhattan federal judge in a closed court hearing Monday. Although a sentence cannot be promised if they are deemed useful to the case and do not violate the agreements, prosecutors are expected to recommend a more lenient sentence.

In parallel, the Securities and Exchange Commission on Wednesday also accused Ellison and Wang of fraud, alleging that they helped Bankman-Fried divert FTX customer funds to a hedge fund by misleading investors. The agency also alleges that Ellison, acting at Bankman-Fried's direction, manipulated the price of FTT, a digital token issued by FTX that executives used to mislead investors about the state of their business.

"When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison and Mr. Wang left investors holding the bag," SEC Chairman Gary Gensler said in a statement.

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Bankman-Fried is accused of orchestrating one of the largest financial frauds in American history. Federal authorities allege that since FTX launched in 2019, the company has siphoned off customer deposits it promised to protect and instead used them as a personal piggy bank for its top executives, who used the funds to buy hundreds of millions of dollars of real estate, make risky investments and donate huge amounts of political money.
|John J. Ray III, called to replace Bankman-Fried as FTX's chief executive and lead its liquidation, said he had never seen "such a complete failure of corporate control at all levels of the organization." In testimony before the House Financial Services Committee last week, he blamed the company's collapse on "an absolute concentration of control in the hands of a very small group of extremely inexperienced and unsophisticated people."