Two of FTX founder Sam Bankman-Fried’s closest associates pleaded guilty and agreed to cooperate with federal prosecutors, as the fallen cryptocurrency honcho was released on a $250 million bond at this first court appearance.
The bond was secured by the Palo Alto, Calif., home of his parents: Stanford University law professors Joseph Bankman and Barbara Fried. Their son will live with them pending trial, with his travel otherwise restricted to the Southern District of New York and the Eastern District of New York for court appearances.
Federal prosecutors allege that Bankman-Fried, better known by his initials SBF, misappropriated customers’ money to pay expenses and debts of Alameda Research, his proprietary crypto hedge fund. The two associates of his who pleaded guilty on Wednesday are top officials from both Alameda and FTX.
Unveiling two plea agreements, U.S. Attorney Damian Williams from the Southern District of New York announced the guilty pleas of Alameda’s former CEO Caroline Ellison, 28, and FTX’s co-founder Gary Wang, 29.
Williams called the charges a fulfillment of a promise he made when he unsealed Bankman-Fried’s indictment on various fraud and conspiracy counts, as well as alleged campaign finance violations.
“As I said last week, this investigation is very much ongoing, and it’s moving very quickly,” Williams declared in a video statement. “I also said that last week’s announcement would not be our last. And let me be clear once again, neither is today’s.”
Ellison and Wang are the second and third individuals to be charged in the massive crypto collapse, following the extradition of Bankman-Fried. Both were released on $250,000 personal recognizance bonds with prohibitions against travel outside the United States.
Williams urged other suspected co-conspirators, whose identities are not yet public, to follow in Ellison and Wang’s footsteps.
“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he warned. “We are moving quickly, and our patience is not eternal.”
Williams also announced that Bankman-Fried is in FBI custody awaiting a court appearance following extradition from the Bahamas. Bankman-Fried, who was federally indicted for campaign finance violations, fraud, and conspiracy, also stands accused by the Securities and Exchange Commission (SEC) defrauding investors by diverting nearly $2 billion to his privately-held crypto hedge fund.
Wang and Ellison were not just business associates of Bankman-Fried. Rather, they were part of the former billionaire’s “inner circle” of 10 roommates. According to one account, this close-knit circle reportedly lived with and dated within the workplace. The pairings are not public, but Ellison and Bankman-Fried reportedly were among those who dated, according to Insider.
Prosecutors released plea agreements late Wednesday. Ellison pleaded guilty to two counts of wire fraud, five counts of conspiracy to commit wire, securities, and commodities fraud, and money laundering. Likewise, Wang pleaded guilty to wire fraud, and three counts of conspiracy involving wire, securities, and commodities fraud.
In the agreements, Ellison and Wang promised to “cooperate fully” with law enforcement, and to “truthfully and completely disclose all information concerning all matters” under investigation. The documents also specify that should the time come when prosecutors deem Ellison and Wang not to have provided “substantial assistance” in the case, that their respective deals will be revoked.
No specific sentences were included in in the plea agreement documents, though both documents were partially redacted.
Ilan Graff, attorney for Wang, told Law&Crime in an email Thursday, “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”
Ellison’s attorney did not immediately respond to request for comment.
[Screengrab via BBC]
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