Alameda’s Caroline Ellison, FTX’s Gary Wang Plead Guilty to DOJ ‘Fraud’ Charges, Also Settle With SEC, CFTC

Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pleaded guilty to charges tied to FTX’s collapse, U.S. Attorney Damian Williams announced Wednesday night.

The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) also announced charges against the two, saying Ellison manipulated the price of FTT, an exchange token issued by FTX, at exchange founder Sam Bankman-Fried’s direction.

The two are cooperating with investigators, Williams announced. The U.S. Attorney for the Southern District of New York (SDNY) did not specify what the two were being charged with. Court records were not immediately available.

FTX founder Sam Bankman-Fried was charged with eight crimes by the SDNY earlier this month after he was arrested in Nassau. The charges include money laundering, wire fraud, securities fraud, and campaign finance violations. He is being extradited to the U.S., Williams confirmed in his statement, saying that the FTX founder was in FBI custody and would appear in court “as soon as possible.”

Read more: Bankman-Fried’s Cabal of Roommates in the Bahamas Ran His Crypto Empire – and Dated. Other Employees Have Lots of Questions

In a statement, SEC Deputy Enforcement Director Sanjay Wadhwa said the three “were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit.”

“By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced,” Wadhwa said.

Ellison was a close confidant of Bankman-Fried’s, and has been targeted by prosecutors for her role in manipulating FTX’s exchange token FTT, which Alameda had used as collateral for investments. In early December Ellison, who is thought to reside in Hong Kong or Nassau, was spotted in Manhattan at a coffee shop leading many to suspect she was working with authorities.

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Read more: Sam Bankman-Fried Is Being Extradited Wednesday, Bahamas Attorney General Says

Shortly after, Ellison retained the law firm WilmerHale to represent herself. WilmerHale counts Stephanie Avakian, a former director of the US Securities and Exchange Commission’s Division of Enforcement, as one of its top attorneys.

“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,” Williams said.

For its part, the CFTC made similar allegations against Wang and Ellison, saying Ellison committed fraud and made “material misrepresentations” tied to the FTT sales, while alleging Wang “allowed Alameda to maintain an essentially unlimited line of credit on FTX.”

UPDATE (Dec. 22, 2022, 02:30 UTC): Adds additional information.

UPDATE (Dec. 22, 02:40 UTC): Adds SEC, CFTC charges.