FTX founder Sam Bankman-Fried left the Bahamas on a flight to the US on Wednesday to face fraud charges as federal prosecutors announced two of his former associates had pleaded guilty to charges and were now cooperating with the government.
Manhattan U.S. Attorney Damian Williams said in a video posted to Twitter late Wednesday evening that Caroline Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTX, had pleaded guilty to defrauding investors in the crypto trading platform.
The revelation that two close former Bankman-Fried associates had decided to cooperate with the government significantly increased the pressure on the former billionaire.
Williams said Bankman-Fried is now in FBI custody and on his way to the US, urging others involved in the alleged fraud to come forward.
“If you have participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” said William. “We are moving fast and our patience is not eternal.”
“I also said last week’s announcement would not be our last, and let me be clear again, that also applies to today,” he added.
The U.S. Securities and Exchange Commission (SEC) said in a separate statement Wednesday evening that it had also charged Ellison and Wang for their role in a multi-year scheme to defraud FTX stock 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 seriously his obligations as a cooperating witness,” Ilan Graff, a lawyer for Wang, said in a statement.
Federal prosecutors in Manhattan last week accused Bankman-Fried of stealing billions of dollars in assets from FTX clients to cover losses at his hedge fund, Alameda Research, in what U.S. attorney Williams called “one of the largest financial frauds in U.S. history.” ‘ mentioned.
The 30-year-old cryptocurrency mogul has admitted FTX’s risk management failures, but says he does not believe he is criminally liable.
A spokesman for Bankman-Fried’s legal team declined to comment.
Bankman-Fried rode a crypto boom to become a multi-billionaire and an influential US political donor before the crash of FTX wiped out his wealth and tarnished his reputation. The collapse was triggered by a wave of customer withdrawals amid concerns about funds being mixed up with Alameda.
The announcement from Williams and the SEC came just hours after Bankman-Fried departed the Bahamas after agreeing to be extradited to the United States at a courthouse.
Bankman-Fried is likely to appear in a U.S. federal court in Manhattan on Thursday. At his appearance in court, known as an arraignment, he is expected to be asked to enter a plea. The American judge would determine whether he is granted bail, and if so, under what conditions.
He is expected to be charged on the eight charges he faces, including bank fraud, money laundering and campaign finance violations.
Bankman-Fried was arrested last week on an extradition request from the US in the Bahamas, where he lives and where FTX is based. He initially said he would challenge the extradition, but Reuters and other media reported this weekend that he would reverse that decision.
He agreed to be extradited in part out of a “desire to make the relevant customers well,” according to an affidavit read in court on Wednesday and dated Dec. 20.
Dressed in a suit, Bankman-Fried stepped to the witness stand in the courtroom, where he spoke clearly and firmly as he was sworn in.
“Yes, I want to waive my right to such formal extradition proceedings,” he told Judge Shaka Serville.
Bankman-Fried’s attorney, Jerone Roberts, said his client was “eager to leave”.
The judge said he was satisfied and that Bankman-Fried was not “forced, coerced or threatened” to make the extradition decision.
The $32 billion exchange was declared bankrupt on November 11, and Bankman-Fried stepped down as CEO the same day.
© Thomson Reuters 2022