FTX Co-Founder, Former Alameda Research CEO Both Plead Guilty to Federal Charges

The Securities and Exchange Commission also charged Wang and Ellison for their “multiyear scheme to defraud equity investors” in the crypto trading platform.

The SEC complaint states that from 2019-2022, Bankman-Fried directed Ellison to prop up the price of FTX’s crypto security token by buying it en masse. That’s because the the token, FTT, was being used as collateral for loans of FTX assets to Alameda, the crypto hedge fund run by Wang and Bankman-Fried, which Ellison ran. The SEC claimed that manipulating the price of FTT also falsely inflated the worth of Alameda and misled FTX investors.

“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” said SEC Chair Gary Gensler. “We further allege that 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. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag.”

During the same time period as the other alleged fraud, Bankman-Fried told investors that Alameda was just a customer like any other, with no special connections or privileges. Meanwhile, he and Wang had been improperly diverting customer assets to the crypto hedge fund, and knowingly made false statements about the companies’ relationship.

As for the former CEO of FTX, Bankman-Fried was flown Wednesday night to New York’s Westchester County Airport after getting extradited to the United States, Bahamian authorities confirmed. He is set to face criminal charges related to the crypto’s collapse as well. Bankman-Fried was in FBI custody, and will appear before a judge as soon as possible, Williams said.

Bahamas’s attorney general’s office said that Bankman-Fried had waived his right to challenge the extradition.

Reporters on the scene witnessed Bankman-Fried leaving a Magistrate Court in Nassau in a dark SUV earlier Wednesday. The vehicle was later seen arriving at a private airfield by Nassau’s airport, from which he is expected to be flown to the United States. He is due to land in New York and will likely appear in front of a U.S. judge on Thursday.

“The Bahamas has determined that the provisional arrest, and subsequent written consent by (Bankman-Fried) to be extradited without formal extradition proceedings satisfies the requirements of the (extradition treaty between the U.S. and the Bahamas) and our nation’s Extradition Act,” said Bahamian Attorney General Ryan Pinder, in a statement.

Bahamian authorities arrested Bankman-Fried last week at the request of the U.S. government. U.S. prosecutors allege he played a central role in the rapid collapse of FTX and hid its problems from the public and investors. The Securities and Exchange Commission said Bankman-Fried illegally used investors’ money to buy real estate on behalf of himself and his family.

The 30-year-old could potentially spend the rest of his life in jail.

Bankman-Fried was denied bail Friday after a Bahamian judge ruled that he posed a flight risk. The founder and former CEO of FTX, once worth tens of billions of dollars on paper, had been held in the Bahamas’ Fox Hill prison, which has been has been cited by human rights activists as having poor sanitation and as being infested with rats and insects.

Once he’s back in the U.S., Bankman-Fried’s attorney will be able to request that he be released on bail.

Disgraced FTX founder Sam Bankman-Fried arrived at a courthouse in the Bahamas Monday for an extradition hearing.

Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.

He has said that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.

At a congressional hearing last week, the new FTX CEO John Ray III, who is tasked with taking the company through bankruptcy, bluntly disputed those assertions: “We will never get all these assets back,” Ray said.