The co-founder of cryptocurrency exchange FTX and the former CEO of Sam Bankman-Fried’s hedge fund, Alameda Research, have pleaded guilty to fraud, a federal prosecutor in New York said Wednesday.
The former CEO, Caroline Ellison, and the co-founder of FTX, Gary Wang, are both cooperating with prosecutors, the U.S. attorney for the Southern District of New York said in a video statement.
The Securities and Exchange Commission also announced civil fraud charges Wednesday night against Ellison and Wang “for their roles in a multiyear scheme to defraud equity investors in FTX.”
The SEC complaint alleges that Wang “created FTX’s software code that allowed Alameda to divert FTX customer funds,” and that Ellison used those funds for Alameda’s trading.
It also alleges that Ellison and Wang worked with Bankman-Fried to move hundreds of millions of dollars of FTX customer funds to Alameda after they realized the companies did not have enough assets to pay back customers.
The SEC said it had agreed to settlements with Wang and Ellison, which are subject to court approval.
Bankman-Fried, 30, has been indicted and is accused of misappropriating billions of dollars deposited in FTX, a huge cryptocurrency exchange that collapsed last month.
Ellison and Wang were charged “in connection with their roles in the frauds that contributed to FTX’s collapse,” U.S. Attorney Damian Williams said.
He said in Wednesday night’s announcement that Bankman-Fried was in FBI custody and was being transported to the U.S. from the Bahamas, where he was arrested on Dec. 12.
Bankman-Fried, the co-founder of Alameda Research, a privately held crypto hedge fund, agreed to be extradited from the Bahamas to the U.S. this week.
Customers lost an estimated more than $8 billion, the acting director of the Commodity Futures Trading Commission’s Enforcement Division has said.
An indictment against Bankman-Fried charging him with eight counts, including wire fraud, conspiracy, money laundering and violating campaign finance laws was unsealed Dec. 13.
Prosecutors called it a year-long fraud that involved funneling money into his private hedge fund. Bankman-Fried also made “tens of millions of dollars in illegal campaign contributions” to candidates and committees associated with both Republicans and Democrats, Williams has said.
This is a developing story. Please check back for updates.
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