(Bloomberg ) — Sam Bankman Fried, co-founder of FTX, arrived in the US Wednesday night to face a series of criminal charges. He was joined by two long-time associates who said they were willing to cooperate with prosecutors.
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Bankman-Fried was concerned to learn that Gary Wang, Caroline Ellison, and Gary Wang had pleaded guilty and worked with federal agents investigating the collapse and investigation of the crypto exchange. In New York, the 30-year-old faces an eight-count indictment.
On Thursday, Bankman-Fried will make his first appearance at Manhattan’s federal court. His lawyers could request bail.
US authorities are conducting a sprawling investigation into the spectacular collapse last month of FTX, which was once one of the world’s biggest crypto exchanges, and the tightly-connected trading firm Alameda Research. The announcement that Ellison and Wang had pleaded guilty ratchets up pressure on Bankman-Fried and other executives who haven’t yet been charged.
“Let me reiterate a call I made last week,” Damian Williams, the US Attorney for the Southern District of New York, said in a statement. “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.”
Bankman-Fried’s representative, who earlier Wednesday had consented to extradition formalities, declined to comment. Ellison’s attorney did not immediately respond to requests for comment.
Ilan Graff, an attorney for Wang, said that his client “has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”
Paul Pelletier, a former federal prosecutor, said that Bankman-Fried is not happy about the guilty pleas. Pelletier claimed that defense lawyers are well aware of the fact that early cooperation is key to securing the best deals for employees.
“When prosecutors credibly telegraph to the public that they’re going to reward cooperators and that they’re coming after the fraudsters, that’s when company executives pay attention,” he said.
Ellison, a 28-year-old woman and the daughter a professor, pleaded guilty seven times. According to prosecutors Wang pleaded guilty only to four. Both were released on bail.
Here are some allegations against Ellison and Wang
The plea agreements for Ellison and Wang said that prosecutors will recommend reduced sentences if they provide “substantial assistance” to the investigation.
Bankman-Fried was the face and voice of FTX, its vast network of businesses. He spoke out about crypto and FTX on stage with celebrities, politicians, and athletes from all walks of the globe.
The Securities and Exchange Commission and the Commodity Futures Trading Commission, which have been investigating FTX’s collapse, also sued Wang and Ellison on Wednesday.
In court filings, both regulators stated that Wang and Ellison did not contest liability and that they had agreed to judgments that would, among other terms bar them trading any security, commodity, or crypto asset, or serving as directors or officers in any company that does. However, no monetary sanctions have been decided.
SEC alleged Ellison, Wang and others participated in a scheme to defraud FTX investors over a number of years. Between 2019 and 2022 Ellison — at the direction of Bankman-Fried — manipulated the price of FTX’s native token FTT by purchasing large quantities in the open market, according to the SEC complaint.
According to the securities regulator, Ellison and Wang knew or ought to have known that Bankman-Fried was falsely promoting FTX as a secure crypto trading platform while improperly transferring customer funds between FTX and Alameda.
The SEC stated that Ellison, Wang and other people are cooperating in its ongoing investigation into any individuals or entities connected to the misconduct at FTX.
The CFTC’s complaint, which also alleges fraud, accused Ellison of directing Alameda to use billions of dollars of FTX funds, including customer funds, for trades on other crypto exchanges and to pay for high-risk investments. According to that lawsuit, Wang “created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX.” The CFTC said the two former executives didn’t contest their liability on its claims.
Ellison, former chief executive of Alameda, Wang and colleague Nishad Singh, were the backbone of Bankman-Fried’s inner circle. Singh hasn’t been accused of wrongdoing by US authorities. FTX was co-founded with Bankman Fried by Wang.
Wang was a roommate at Massachusetts Institute of Technology and met Bankman-Fried in high school math camp. Like Bankman-Fried, Wang was also once one of the richest twentysomethings on the planet — with a stake in the business worth as much as $1.6 billion in March, according to the Bloomberg Billionaires Index.
Ellison, who was acquainted with Bankman-Fried during their time at Jane Street’s quantitative trading shop Jane Street, and had previously been romantically linked to him joined Alameda in its earliest days.
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–With the assistance of Beth Williams
Updates: Ellison and Wang have agreed to the judgments in CFTC, SEC cases.
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