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Caroline Ellison and Gary Wang: FTX co-founders and ex-head of hedge fund Alameda Research pleaded guilty to multiple charges and cooperate with Fed

Caroline Ellison and Gary Wang: FTX co-founders and ex-head of hedge fund Alameda Research pleaded guilty to multiple charges and cooperate with Fed
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CNN

Two executives related to collapsed crypto exchange FTX have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors, according to unsealed court filings. Additionally, the couple is facing civil fraud allegations from the Securities and Exchange Commission, which were announced Wednesday night.

Gary Wang, the co-founder of FTX, and Caroline Ellison, who served as CEO of hedge fund Alameda Research, pleaded guilty to multiple counts of conspiracy and fraud for their role in the scam scheme that led to the collapse of the crypto trading platform.

Damian Williams, the US Attorney for the Southern District of New York, announced the charges in a video message Wednesday night. In a brief statement, he reiterated that the investigation is ongoing, and stressed that these new charges are not the last in the case.

Ilan Graff, an attorney for Wang, said, “Gary has accepted responsibility for his actions and takes his duties as a cooperating witness seriously.” Wang has already appeared in court to plead guilty.

Ellison’s attorneys could not be immediately reached for comment.

The charges were deemed unsealed Sam Bankman-Fried was on his way to the United States from the Bahamas, where he was arrested last week on eight counts of what Williams called one of the biggest financial scams in American history. Bankman-Fried waived his right to contest extradition on Wednesday and boarded a plane bound for the United States in the early evening.

Bankman-Fried is scheduled to appear before a judge in Manhattan on Thursday. Prosecutors and his attorneys have been holding talks about a bail package that would allow him to avoid incarceration, people familiar with the matter told CNN.

Wang co-founded FTX with Bankman-Fried in 2019 and also worked with him on his hedge fund Alameda Research. Ellison became CEO of Alameda in October 2021, according to court filings.

Prosecutors allege that Bankman-Fried was involved in several fraudulent schemes. Among them, they allege Bankman-Fried stole money from FTX clients to support Alameda, made investments in other companies, bought luxury real estate, and donated tens of millions of dollars to political campaigns.

In letters dated Sunday, December 18, signed the following day, Ellison and Wang agreed to plead guilty and to cooperate with prosecutors.

Ellison pleads guilty to seven counts, including wire fraud, conspiracy to commit money laundering, conspiracy to commit securities fraud, conspiracy to commit commodity fraud and conspiracy to commit wire fraud. She faces the same crimes as Bankman-Fried, except for the campaign finance charge.

Wang has agreed to plead guilty to four counts: wire fraud, conspiracy to commit wire fraud, conspiracy to commit commodity fraud and conspiracy to commit securities fraud.

“As I said last week, this investigation is ongoing and moving very rapidly,” Williams said. “I also said that last week’s announcement would not be our last, and I want to reiterate that today’s is not the case either.”

Federal regulators also accused Ellison and Wang of playing lead roles in a year-long plot to defraud FTX investors.

The Securities and Exchange Commission alleges that Ellison and Wang actively participated in a “scheme to defraud” investors. Between 2019 and 2022, Ellison manipulated the price of FTT, FTX’s security token, “at the direction of” Bankman-Fried, regulators claimed. The SEC said this manipulation was done by buying large amounts of FTT on the open market to prop up the price.

Regulators say this alleged manipulation inflated Alameda’s holdings, overstated the hedge fund’s balance sheet and “misled” investors about FTX’s risk.

“When the FTT and the rest of the house of cards collapsed, Mr. Bankmann-Fried, Ms. Ellison and Mr. Wang kept investors in the bag,” said SEC Chairman Gary Gensler said in a statement.

Wang created the source code of FTX that allowed Alameda to reroute FTX client funds, and Ellison used embezzled funds in the hedge fund’s trading activities, according to the SEC.

“Ellison and Wang were active participants in FTX’s program of deceiving investors and engaging in behaviors that were critical to its success,” the SEC said said in a press release.

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