Two more associates of Sam Bankman-Fried, the founder of the collapsed crypto exchange FTX, have turned on him. Caroline Ellison, who ran FTX’s trading affiliate, and Gary Wang, an FTX founder, pleaded guilty to fraud and are cooperating in the federal criminal case against Bankman-Fried.
The moves by Ms. Ellison and Mr. Wang could spur more high-ranking FTX executives to strike plea deals in exchange for their testimony. That leaves Mr. Bankman-Fried — who was extradited to the United States from the Bahamas, and could be arraigned as soon as today — in more legal jeopardy than ever.
Ms. Ellison and Mr. Wang contradicted Mr. Bankman-Fried’s defense. While Mr. Bankman-Fried has said repeatedly — including at the DealBook Summit last month — that he wasn’t aware of what was happening at Alameda, the exchange’s trading affiliate, documents filed yesterday by the authorities claim otherwise.
From the S.E.C.’s civil complaint against Ellison and Wang:
Defendants and Bankman-Fried knew that FTX, at Bankman-Fried’s direction, had allowed Alameda to invest “client assets” and that Alameda had in fact done so, using FTX customer funds to make investments far riskier than “treasuries.”
In fact, the S.E.C. accuses Mr. Bankman-Fried of illicitly using customer money from FTX from the beginning to fund his crypto empire:
From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried, actively supported by Defendants, continually diverted FTX customer funds to Alameda and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases.