FTX founder Sam Bankman-Fried left the Bahamas on a flight to the United States on Wednesday to face a fraud charge, when federal prosecutors announced two of his former employees had pleaded guilty to the charges and are now with the government cooperate.
Manhattan U.S. Attorney Damian Williams said in a video posted to Twitter late Wednesday night that Caroline Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTXhad pleaded guilty to defrauding investors on the crypto trading platform.
The revelation that two of Bankmann-Fried‘s closest former associates had decided to work with the government, which had significantly increased the pressure on the former billionaire.
Williams said Bankman-Fried is now in FBI custody and en route to the United States, and urged others involved in the alleged fraud to come forward.
“If you have been involved in wrongdoing at FTX or Alameda, now is the time to preempt it,” William said. “We move fast and our patience is not eternal.”
“I also said last week’s announcement wouldn’t be our last, and just to be clear, today’s wouldn’t be either,” he added.
The U.S. Securities and Exchange Commission (SEC) said in a separate statement Wednesday night that it also indicted Ellison and Wang for their role in a multi-year plan to deceive FTX investors.
The US Commodity Futures Trading Commission also said it had filed fraud charges against Ellison and Wang.
An attorney for Ellison did not immediately respond to a request for comment.
“Gary has accepted responsibility for his actions and takes his duties as a cooperating witness seriously,” Ilan Graff, an attorney for Wang, said in a statement.
Federal prosecutors in Manhattan last week accused Bankman-Fried of stealing billions of dollars in FTX client assets to offset losses at his hedge fund Alameda Research, in what US Attorney Williams called “one of the largest financial frauds in American history.”
The 30 year old cryptocurrency Mogul has acknowledged risk management failures at FTX but said he doesn’t believe he is criminally responsible.
A spokesman for Bankman-Fried’s legal team declined to comment.
Bankman-Fried experienced a crypto boom to become a multiple billionaire and an influential political donor in the US before the FTX crash wiped out his fortune and tarnished his reputation. The collapse was caused by a spate of customer withdrawals amid concerns over funds being mixed up with Alameda.
The announcement by Williams and the SEC came just hours after Bankman-Fried fled the Bahamas after agreeing to his extradition to the United States in a courthouse.
Bankman-Fried is scheduled to appear in US federal court in Manhattan on Thursday. At his court appearance, known as the indictment, he is expected to be asked to plead. The US judge would decide whether to grant him bail, and if so, under what conditions.
He is expected to face the eight charges he faces, including wire fraud, money laundering and campaign finance violations.
Bankman-Fried was arrested last week on a US extradition request in the Bahamas, where he lives and where FTX is based. He initially said he would appeal the extradition, but Reuters and other media outlets reported over the weekend that he would reverse that decision.
According to a Dec. 20 affidavit read in court on Wednesday, he agreed to partial extradition because he had “a desire to cure the customers involved.”
Dressed in a suit, Bankman-Fried took the stand in court, where he spoke clearly as he was sworn in.
“Yes, I wish to waive my right to such formal extradition proceedings,” he told Judge Shaka Serville.
Bankman-Fried’s defense attorney Jerone Roberts said his client was “eager to leave”.
The judge said he was satisfied that Bankman-Fried was not “forced, coerced or threatened” to make the extradition decision.
The $32 billion exchange declared bankruptcy on November 11, and Bankman-Fried resigned as CEO the same day.
© Thomson Reuters 2022
