Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have pleaded guilty to federal fraud charges and are cooperating in the Justice Department's investigation of the former FTX CEO, Sam Bankman-Fried.
United States Attorney for the Southern District of New York (SDNY) Damian Williams made the announcement on Dec. 22, emphasizing that this latest major development is unlikely to be the last.
“As I said last week, this investigation is ongoing and moving very quickly. I also said last week's announcement would not be our last and let me be clear once again, neither is today's,” he said, adding that:
“I'm announcing that SDNY has filed charges against Caroline Ellison [...] and Gary Wang [...] in connection with their roles in the frauds that contributed to FTX's collapse. Both Ms. Ellison and Mr. Wang have plead guilty to those charges and both are cooperating with the SDNY.”
Williams also confirmed that SBF is now in the custody of the Federal Bureau of Investigation (FBI) and is “on his way back to the United States” where he will be transported directly to the Southern District of New York to appear before a judge “as soon as possible.”
Williams also used the statement to send a stark warning to anyone that may have 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.”
In a separate action, the United States Securities and Exchange Commission announced on Dec. 21 that it has charged Ellison and Wang for their rules in a "multiyear scheme to defraud equity investors in FTX," adding that it is also investigating other securities law violations and into other entities and persons relating to the misconduct as well.
The SEC noted that both Ellison and Wang are cooperating with its ongoing investigations as well.
SBF was officially handed over from Bahamian custody to U.S. authorities on Dec. 21 after he waived his right to a formal extradition process that could have taken weeks. His lawyer claimed that SBF wanted to speed up the process as he is currently driven to “put the customers right.”
Meanwhile, Ellison's recent guilty plea and cooperation with the SDNY may be unsurprising for some, given that she was reportedly spotted at a coffee shop just a short walk away from the U.S. Attorney’s Office and the New York FBI office on Dec. 5.
The United States Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) have hit former Alameda Research CEO Caroline Ellison and former FTX co-founder Gary Wang with fresh fraud charges.
The new charges from the SEC and CFTC come as the pair plead guilty to federal fraud charges filed by the U.S. Department of Justice (DOJ) earlier on Dec. 22.
SEC states that Ellison and Wang were charged for their role in the "multiyear scheme to defraud equity investors in FTX,” with the SEC also investigating whether other securities laws were violated as well.
The SEC alleges that Ellison, under the direction of former FTX CEO Sam Bankman-Fried, furthered the scheme by manipulating the price of FTX Token, which is described as a crypto security token in the document. The said manipulation was conducted by “purchasing large quantities on the open market to prop up its price,” which took effect between 2019 and 2022.
As for the CFTC’s charges, amendments were made to its Dec. 13 fraud filing against Samuel Bankman-Fried, FTX Trading, and Alameda Research to now include Ellison and Wang as named defendants.
The amended complaint now lays charges against Ellison for “fraud and material misrepresentations in connection with the sale of digital asset commodities in interstate commerce.” As for Wang, the former FTX exec has been charged with “fraud in connection with the sale of digital asset commodities in interstate commerce.”
As for the conduct involved that led to the charges, both the SEC and CFTC allege that Wang created FTX’s software code that enabled Alameda to divert customer funds from FTX, which then allowed Ellison to misappropriate those funds for Alameda’s trading activities.
Former FTX CEO Sam Bankman-Fried has also reportedly landed in the U.S. after being extradited from The Bahamas for fraud charges laid by the U.S. Government. The indictment against SBF is signed by the U.S. Attorney for the Southern District of New York, Damian Williams, and contains eight counts.
SBF is facing charges from the Justice Department, along with SEC and CFTC, for defrauding investors and lenders. Royal Bahamas police arrested the former crypto billionaire on Dec. 12, and his initial application for bail was denied in a Bahamian court.
Peer-to-peer cryptocurrency marketplace Paxful has removed Ether, Ethereum’s native token, from its marketplace, citing a number of concerns around the world’s second-largest cryptocurrency by market capitalization.
Paxful CEO Ray Youssef announced the move in a message to some 11.6 million users of the platform, which he subsequently shared on Twitter.
Youssef highlighted three major concerns around the Ethereum ecosystem that led to the marketplace removing ETH, citing Paxful’s intent to maintain its integrity and efforts to combat “economic apartheid” around the world driven by fiat monetary systems:
“I want to see a world where Bitcoin frees billions of people held back by this evil system, especially those unnecessarily harmed living in the global south.”
Ethereum’s switch from a proof-of-work (PoW) to proof-of-stake (PoS) consensus was the first reason given for the move. Youssef explained that PoW is the “innovation that makes Bitcoin the only honest money there is” and that Ethereum’s transition to PoS has turned ETH into a “digital form of fiat.”
Youssef also criticized Ethereum for not being decentralized and cited the protocol’s ability to allow the tokenization of assets as a driver of scams and fraud across the cryptocurrency ecosystem.
“The tokens that ETH has spawned have been scams that robbed people of billions. They have stolen valuable momentum away from Bitcoin and cost us years on our mission.”
Paxful’s CEO has also been a vocal advocate for Bitcoin and cryptocurrency self-custody in the wake of FTX’s collapse in November 2022. Youssef implored cryptocurrency users to shift BTC holdings to self-custody storage, with Paxful users also encouraged to follow suit.
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