- Two execs associated with Sam Bankman-Fried are facing criminal charges, the SEC said.
- It said Alameda Research’s Caroline Ellison and FTX’s Gary Wang were “active participants” in fraud.
- The SEC complaint was published Wednesday. Read it here.
Two of Sam Bankman-Fried’s top executives are accused of participating in a scheme to defraud FTX’s equity investors and customers, the Securities and Exchange Commission said in a complaint published Wednesday.
Bankman-Fried, who cofounded the crypto trading platform FTX and the hedge fund Alameda Research, was arrested in the Bahamas last week and was extradited to the US on Wednesday, where federal prosecutors have charged him with eight counts including wire fraud and conspiracy to commit money laundering.
The SEC on Wednesday said it had also filed charges against Caroline Ellison, the former CEO of Alameda, and Wang, who cofounded FTX and served as its chief technology officer. The regulator accused Ellison and Wang of being “active participants” in what it has described as a years-long scheme led by Bankman-Fried to defraud customers and investors.
Bankman-Fried has been accused of siphoning off FTX customers’ money for his personal use on venture investments, real-estate purchases, and political donations. The SEC says Bankman-Fried used Alameda as “his personal piggy bank.”
The SEC said in its latest complaint that Ellison manipulated the price of FTT, FTX’s in-house token, by purchasing large quantities on the open market. The agency said this inflated the valuation of Alameda Research’s FTT holdings and caused the value of collateral on Alameda’s balance sheet to be overstated, misleading investors.
The SEC said that Wang created software that helped divert FTX customer funds to Alameda and that Ellison misappropriated these funds for Alameda’s trading activity. The SEC said special privileges given to Alameda enabled it to draw on FTX customer assets “to a virtually unlimited extent for its own uses.”
The agency said Ellison and Wang also knew — or should have known — that statements Bankman-Fried made to investors about FTX’s financial condition and risk management, as well as its separation from Alameda, were “false and misleading.” It also said they knew FTX hadn’t told its investors and customers that customer funds were used by Alameda for trading strategies and servicing debt to third-party lenders.
“When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag,” the SEC’s chair, Gary Gensler, said in a statement.
The SEC said Ellison and Wang were cooperating with the investigation.
Read the full complaint here: