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New York
CNN
—
The stunning bankruptcy of one of the cryptocurrency industry’s most prominent companies has quickly turned into a legal battle between a former exec and a former lover’s partner.
When FTX founder Sam Bankman-Fried was extradited from the Bahamas to the United States last week, two of his former business partners pleaded guilty to multiple fraud and collusion charges.
Former CEO of crypto hedge fund Alameda, 28-year-old Caroline Ellison has apologized before a federal judge in New York, saying she and her former colleagues were deliberately accused by Bankman-Fried’s FTX exchange customers of Steal billions of dollars and, according to court records, cover it up.
Ellison said in court, “I’m really sorry for what I did. I knew it was wrong.”
Ellison told the court that Alameda had a virtually unlimited line of credit on FTX and knew the exchange would need to use customer money to make loans to hedge funds. She also agreed to keep the very close relationship between the two companies hidden from investors and customers.
Between July and October, she told the court that Ellison had agreed with Bankman-Fried and others to provide “materially misleading financial statements to Alameda’s lenders” and a balance sheet that concealed the extent of Alameda’s borrowings. said to have created It was recently opened on December 19th.
Ellison has been charged with seven counts, including wire fraud and money laundering conspiracy. She and Bankman-Fried were close business associates who dated briefly.
According to the transcript, Ellison said he knew FTX executives had made arrangements to allow Alameda access to an unlimited line of credit, without having to post collateral or pay interest on negative balances. was.
Ellison told the court, “I understand that if Alameda’s FTX account has a significant negative balance in a particular currency, it means that Alameda owes funds that its FTX customers have deposited with the exchange. Was.
Another associate, former FTX Chief Technology Officer Gary Wang, pleaded guilty to four counts of similar charges.
Wang told the court that part of his role at FTX included changing the exchange’s code to give Alameda “special privileges” on FTX.
“Between 2019 and 2022, as part of my employment at FTX, I was directed to and consented to make certain changes to the platform’s code,” Wang said in court. We implemented the change, and we knew that this would give us special privileges for Alameda Research on the FTX platform. I did so knowing that others have stated that they likely invested in FTX and used it based on those false representations.”
“I knew what I was doing was wrong,” he added.
According to court transcripts, King pleaded guilty at a hearing that began at 11:00 a.m. on December 19, and Ellison did the same around 4:30 p.m. that day, as SBF remained in the Bahamas. .
Wang faces up to 50 years in prison, according to federal sentencing guidelines referenced in court. Ellison faces up to 110 years in prison on the seven counts she pleaded guilty to, according to federal sentencing guidelines.
Both are out on bail as negotiated in their plea deal. Ellison and Wang’s sentencing is scheduled for December 19, 2023.
Both Ellison and Wang are cooperating with federal prosecutors, which could put them at a disadvantage as witnesses against Bankman-Fried, who has repeatedly denied that he willfully defrauded customers and investors.
Bankman-Fried, 30, appeared in a US court in New York on Thursday, where a federal judge released him after posting $250 million in bail. He must surrender his passport and continue his house arrest at his parents’ home in Palo Alto, California.
$250 million is an outrageous sum, but Bankman-Fried won’t have to pay unless he violates the terms of his bail agreement or fails to appear in court. An atypical bail plan was agreed as part of his commitment to waive his extradition dispute.
After appearing in court, Bankman-Fried spotted In a business class lounge at New York’s John F. Kennedy International Airport. Cryptocurrency reporter Tiffany Fong also tweeted a photo of Bankman Fried on an American Airlines flight.
Bankman-Fried’s legal team confirmed to CNN Business that he arrived in Palo Alto and is home with his parents. His attorney declined to comment on the guilty pleas by Ellison and Wang.
A federal judge said Thursday Bankman-Fried will be arraigned on eight crimes, including fraud and conspiracy, at an unspecified future date.
Prosecutors allege Bankman-Fried orchestrated “one of the biggest financial scams in American history” to steal billions from FTX customers, cover losses at Alameda and enrich themselves doing. If convicted, he could face life in prison.
Bankman-Fried tried to portray himself as an ill-fated entrepreneur who went skiing before being arrested in the Bahamas earlier this month. He apologized repeatedly to his customers and FTX staff, “fed up,” while denying that he deliberately deceived anyone.
— CNN’s Lauren del Valle and Kara Scannell contributed to the report.
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