Noose Tightens Around Sam Bankman-Fried

Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz

— US Attorney SDNY (@SDNYnews) December 22, 2022

The Rats Rat on SBF

The Wall Street Journal reports Caroline Ellison, Associate of FTX Founder Sam Bankman-Fried, Pleads Guilty to Criminal Charges

Caroline Ellison, the former chief executive of Alameda Research, a trading firm tied to FTX, and Gary Wang, FTX’s former chief technology officer, both pleaded guilty to criminal offenses similar to those Mr. Bankman-Fried was charged with last week.

Ms. Ellison, 28 years old, pleaded guilty to seven counts, including wire fraud and conspiracy to commit securities fraud, according to her plea agreement, which was signed Monday. Mr. Wang, 29, pleaded guilty to four counts, including wire fraud.

The Securities and Exchange Commission and Commodity Futures Trading Commission also sued Ms. Ellison and Mr. Wang, alleging they committed civil securities and commodities fraud. Both agreed to settle the SEC’s and CFTC’s claims and to accept liability, with monetary penalties to be decided in the future, according to the regulators.

The SEC said Ms. Ellison, from 2019 to 2022, manipulated the price of FTT, a digital asset that FTX issued. Ms. Ellison did so at the direction of Mr. Bankman-Fried, according to the SEC. The price manipulation allowed Alameda to inflate the value of FTT that it held and used as collateral for undisclosed loans from FTX customers, the SEC said.

Mr. Bankman-Fried on at least two occasions became worried about the price of FTT dropping and told Ms. Ellison to have Alameda buy FTT, the SEC’s complaint says. Binance, a rival crypto exchange, was also a large holder of FTT tokens; its announcement in November that it would sell its FTT stake caused the price of the token to plummet, although Ms. Ellison had offered publicly to buy Binance’s holdings of FTT at $22 each.

The SEC alleged that FTT is a security, giving the agency authority to oversee how it was traded. FTX’s profits from selling FTT to investors helped fund the exchange’s growth and development, the SEC said.

“Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading,” SEC Chair Gary Gensler said. “When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag.”

In May, when digital assets plummeted amid the $40 billion crash of TerraUSD and Luna and crypto lenders recalled billions of dollars in loans from Alameda, Mr. Bankman-Fried directed billions in FTX customer assets to Alameda so that the trading shop could maintain its lending relationships, the SEC said. Mr. Wang and Ms. Ellison were aware of the transfer of funds and Ms. Ellison then used FTX customer’s assets to repay Alameda’s debts, according to the complaint.

Binance Smoking Guns

If FTX tokens are a security, how are Binance tokens not a security?

Spotlight Binance

Why is he on a rug. https://t.co/5BgMM5hRag

— Tyler (@ApeDurden) December 21, 2022

How long before Binance collapses and/or Binance CEO CZ is charged with fraud?

Article posted with permission from Mish Shedlock