Gary Wang, former CTO of FTX, and Caroline Ellison, former CEO of Alameda Research, have pleaded guilty to fraud and are cooperating with the investigation centered on Sam Bankman-Fried. They risk heavy prison sentences.
Sam Bankman-Fried, the founder and former CEO of FTX, has been extradited to the United States, where he faces civil and criminal charges for the collapse of the cryptocurrency exchange. But he is no longer the only business leader in the hands of justice. Late last night, US Attorney Damian Williams announced that Gary Wang, co-founder and former CTO of FTX, and Caroline Ellison, former CEO of Alameda Research, have also been charged with fraud. Both have pleaded guilty and are cooperating with the investigation as the seriousness of the charges against them could see them spend the rest of their lives in prison.
The timing of the announcement doesn’t seem like a coincidence, and it’s hardly the case. Until yesterday, Sam Bankman-Fried was the only executive involved in the FTX scandal to be formally charged with a crime. This suggested that other disgraced crypto empire bosses may be cooperating with authorities to avoid the harshest penalties.
As reported by The Washington Post, Caroline Ellison pleaded guilty to seven counts. Among other things, money laundering and conspiracy to commit bank, securities and commodity fraud. The charges against him are of a similar gravity to those against Sam Bankman-Fried, for which he faces up to 110 years in prison.
Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz— US Attorney SDNY (@SDNYnews) December 22, 2022
Gary Wang’s case is similar, although he only pleaded guilty to four counts of fraud and conspiracy. His possible sentence would not be as extreme as Ellison’s, but he could still face up to 50 years in prison.
Former employees of Sam Bankman-Fried cooperate to obtain less severe sentences
So far, Gary Wang and Caroline Ellison have been released after posting $250,000 bail each. By admitting their guilt and cooperating with authorities to clarify FTX’s situation, both attempt to reduce their sentences. If prosecutors believe their efforts are worthwhile and the defendants are not violating the terms of their plea agreements, they may recommend less extreme sentences than those listed above. However, there is no guarantee that this will ultimately be the case.
Following his extradition from the Bahamas, Sam Bankman-Fried is scheduled to appear in Manhattan District Court on Thursday. His lawyers also want him to be tried outside prison, or even placed under house arrest. However, the final decision in the case will be made by the federal judge assigned to the case.
There is a lot of speculation as to whether the cooperation of other former FTX executives with federal authorities will complicate the landscape for the company’s former CEO. Remember that in addition to the Department of Justice charges, the United States Securities and Exchange Commission (SEC) has also charged Caroline Ellison and Gary Wang with fraud.
In this sense, the panorama seems more complicated for Ellison. Although the two leaders are criticized for misleading investors and using their funds in FTX without their consent, the agency claims that the former head of Alameda Research manipulated the price of FTT, the original FTX token. The latter by direct order of Sam Bankman-Fried.
At present, nothing is said about the state of health of Ryan Salame, co-CEO of the FTX subsidiary in the Bahamas. The boss made headlines after speaking out against SBF before the island’s securities commission, two days before the company filed for bankruptcy. At the time, he said, only three people had the necessary access to the systems to transfer funds from FTX to Alameda Research: Gary Wang, Sam Bankman-Fried and Nishad Singh, the former director of the company engineering.