FTX executives plead guilty to criminal charges

Two senior executives associated with cryptocurrency exchange FTX pleaded guilty to criminal charges on Wednesday.

U.S. Attorney Damian Williams in the Southern District of New York announced that both Caroline Ellison, the former CEO of Alameda Research, and Gary Wang, a co-founder of FTX, had pleaded guilty to charges related to their roles in the collapse of the company.

Williams also said in his video statement that FTX founder and former CEO Sam Bankman-Fried was in FBI custody and is on his way back to the U.S. after being extradited from the Bahamas.

Bankman-Fried will be taken to New York and appear before a judge as quickly as possible, Williams said. 

Earlier on Wednesday, Bahamian authorities announced they were handing over Bankman-Fried after he had agreed to be extradited to the U.S. to face charges of wire fraud, money laundering and campaign finance violations.

The U.S. accused Bankman-Fried and FTX of diverting customer funds to his private, affiliated company Alameda Research to make investments.

In a parallel action, the Securities and Exchange Commission (SEC) on Wednesday accused both Wang and Ellison of violating the Securities Act of 1933 and the Securities Exchange Act of 1934.

Ellison, 28, is accused of manipulating the price of FTT, the crypto coin on FTX, at the direction of Bankman-Fried. From 2019 to 2022, she allegedly purchased large quantities of FTT on the open market.

FTT was used as collateral for loans to Alameda Research. The price manipulation scheme inflated the value of FTT, overstating the value of Alameda on balance sheets and misleading investors about the risk of FTX, the SEC charges.

Wang is accused of creating software code to help divert customer funds to Alameda Research.

From May 2019 to November 2022, Bankman-Fried allegedly raised billions of dollars from investors through false statements that FTX was a safe trading platform and Alameda had no special privileges.

The SEC charges that both Ellison and Wang knew the statements Bankman-Fried made were false.

“When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag,” SEC Chair Gary Gensler said in a statement Wednesday. “Until crypto platforms comply with time-tested securities laws, risks to investors will persist.”

FTX filed for bankruptcy last month and a restructuring officer has taken charge of the company to manage the bankruptcy proceedings. The high-profile collapse of FTX led to congressional hearings and a class-action lawsuit from former investors.

– Updated 10:48 p.m.