Business partners turn on Sam Bankman-Fried

New York

The Staggering Collapse of One of Crypto’s Most Important Firms Has Quickly Turned into a a legal battle pitting former executives against former romantic partners.

Last week, as FTX founder Sam Bankman-Fried was extradited to the United States from the Bahamas, two of his former business partners pleaded guilty to multiple charges of fraud and conspiracy.

Caroline Ellison, the 28-year-old former CEO of crypto hedge fund Alameda, has apologized to a federal judge in New York, saying she and her former associates knowingly stole billions of dollars from clients of the Bankman-Fried’s FTX exchange and sought to cover it up, according to court transcripts.

“I’m so sorry for what I did,” Ellison told the court. “I knew it was wrong.”

Ellison told the court that Alameda had a virtually unlimited borrowing facility in FTX and knew the exchange would need to use client funds to fund loans to the hedge fund. She also agreed to keep the unusually close relationship between the two companies hidden from investors and customers.

From July to October, she told the court, Ellison agreed with Bankman-Fried and others to provide “substantially misleading financial statements to Alameda lenders” and prepared balance sheets that hid the extent of the loans from Alameda.

Ellison was charged with seven counts, including conspiracy to commit wire fraud and money laundering. She and Bankman-Fried were close associates who briefly dated.

Another associate, Gary Wang, former chief technology officer of FTX, pleaded guilty to four similar counts.

Wang told the court that part of his role at FTX was to make changes to the exchange’s code that would grant Alameda “special privileges” over FTX.

“I knew what I was doing was wrong,” he said.

Both Ellison and Wang are cooperating with federal prosecutors, making them potentially damning witnesses against Bankman-Fried, who has repeatedly denied intentionally defrauding clients and investors.

Bankman-Fried, 30, appeared in US court in New York on Thursday, where a federal judge released him on $250 million bail. He is required to surrender his passport and remain under house arrest at his parents’ home in Palo Alto, California.

Although $250 million is an extraordinary sum, Bankman-Fried won’t have to pay it unless he violates the terms of his bond agreement or shows up in court. The atypical bail plan was accepted as part of his pledge to give up his extradition fight.

After his court appearance, Bankman-Fried was Point in a business class lounge at John F. Kennedy International Airport in New York. Crypto reporter Tiffany Fong also tweeted a photo showing Bankman-Fried on an American Airlines flight.

Bankman-Fried’s legal team confirmed to CNN Business that he arrived in Palo Alto and was staying with his parents. His attorney declined to comment on Ellison’s and Wang’s guilty pleas.

The federal judge said Thursday that Bankman-Fried will be arraigned on eight counts, including fraud and conspiracy, at an unspecified future date.

Prosecutors allege Bankman-Fried orchestrated “one of the biggest financial frauds in American history,” stealing billions of dollars from FTX clients to cover Alameda’s losses and enrich himself. If convicted, he faces life in prison.

Bankman-Fried, before his arrest in the Bahamas earlier this month, had sought to present himself as a hapless entrepreneur who got by on his skis. He repeatedly apologized to FTX customers and staff, saying he “fed up,” while denying having knowingly defrauded anyone.

– CNN’s Lauren del Valle and Kara Scannell contributed reporting.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top