Two executives in Sam Bankman-Fried's fallencryptocurrencies empire have pleaded guilty and are cooperating with prosecutors. Damian Williams, the US Attorney for the Southern District of New York, made the announcement.
Williams didn't specify the charges the two pled to but said the guilty pleas were related to their roles as insiders 10 percent of Alameda Research was owned by Wang, who was a co- founder of FTX. The other 90 percent was held by Bankman- Fried. Ellison was the CEO of Bankman- Fried's company.
The Washington Post reported that Ellison pleaded guilty. The WaPo says she could face up to a century in prison. Wang will be sentenced to up to 50 years in prison.
Bankman- Fried and Wang are said to have given Alameda and Ellison the green light to use funds deposited by FTX customers.
FTX moved $20 billion a day at its peak. The only people who knew that FTX was engaging in fraud were Bankman- Fried and a few others. Both criminal and civil cases have been brought against Bankman- Fried. FTX customer funds were used for loans to executives, risky trading, political donations, and extravagant spending on everything from beachfront homes to private jet flights.
Details on Wang and Ellison's roles are included in the civil suits filed by the SEC andCFTC. According to the SEC complaint, Wang and Ellison gave Alameda Research a "virtually unlimited line of credit."
According to the SEC complaint, Bankman- Fried and Wang gave Alameda and Ellison carte blanche to use FTX customer assets for Alameda's trading operations.
The SEC suit states that Ellison borrowed billions of dollars from banks. The loans were backed by the FTT token, which was given to Alameda for free. The job of Ellison was to increase the price of the token by buying it on various platforms. It was possible for Alameda to borrow more.
The SEC alleges that Ellison and Bankman-Fried schemed to manipulate the price of FTT to prop up the value of their house of cards.
The fraud came to light after a blockbuster CoinDesk article reported that Alameda Research's balance sheet consisted mostly of theFTT token, which kicked off a series of events that ended in FTX's bankruptcy During that time, the CEO of the company said he would sell his holdings and the CEO of the company said he would buy a token.
According to the complaint, Ellison and Bankman-Fried began to liquidate Alameda Research's investments in order to save the token price. It wasn't sufficient. Bankman- Fried, Ellison, and a third unnamed FTX executive expressed surprise that the price of Bitcoins hadn't fallen more.
Ellison acknowledged that her November 6 offer to buy the CEO's holdings at $22 per token was kind of a misleading thing to say.
As panicked FTX customers began to withdraw their money from the exchange, Ellison and Bankman- Fried directed Alameda researchers to "generally do anything possible to quickly obtain billions of dollars of capital to send to FTX." It wasn't sufficient.
Ellison told staff the truth about Alameda in a meeting on November 9th.
In response to a staff question,Ellison acknowledged that her November 6 statement that she would buy the CEO's holdings at $22 per token was kind of a misleading thing to say. After that, most of the staff quit.
John J. Ray, who was charged with cleaning up after the fraud at Enron, was the new CEO of FTX.
The lender wanted their money back in May when the price of the digital currency fell. To keep them happy, Bankman- Fried ordered that customer deposits be sent to the lender. Ellison paid Alameda's debts.
The SEC said in its suit that Bankman-Fried and Ellison lied to investors because FTX couldn't fulfill billions of dollars in customer withdrawal demands.
The SEC said in its suit that customer funds had been diverted from the beginning. The suit was similar to this one.
Alameda got a hold of FTX customer funds in two different ways, first by the line of credit and then by directing customers to deposit currency into accounts controlled by Alameda. There was no difference between FTX customer funds and Alameda's own funds. Bankman- Fried and Wang gave Alameda and Ellison carte blanche to use FTX customer assets for whatever purpose they wanted.
The uses weren't authorized by customers. The SEC suit accuses Alameda of using customer funds in an improper way. The suit says that FTX's terms of service explicitly forbid this type of thing. It's important to keep customer assets safe and separate them from other funds in order to prove fraud charges.
Alameda Bankman- Fried had a personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments.
Sam Bankman- Fried was extradited from the Bahamas to the US. Williams said Bankman- Fried would be taken to New York to appear before a judge as soon as possible.
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