Bankman-Fried employees turn around as FTX co-founder arrives in NYC

Bankman-Fried is scheduled to appear in federal court in Manhattan for the first time on Thursday. His lawyers could ask for bail.

US authorities are conducting a full-scale investigation into the spectacular collapse of FTX, one of the world’s largest crypto exchanges, and closely linked trading firm Alameda Research last month. The announcement that Ellison and Wang have pleaded guilty increases the pressure on Bankman-Fried and other executives who have not yet been charged.

“Let me repeat a call I made last week,” Damian Williams, the U.S. Attorney for the Southern District of New York, said in a statement. “If you have complicity in wrongdoing at FTX or Alameda, now is the time to step up. We move fast and our patience is not eternal.”

A Bankman-Fried representative, who formally agreed to the extradition earlier Wednesday, declined to comment. Ellison’s attorney did not immediately respond to requests for comment.

Ilan Graff, an attorney for Wang, said his client “has taken responsibility for his actions and takes his duties as a cooperating witness seriously.”

Former federal prosecutor Paul Pelletier said the guilty pleas are bad news for Bankman-Fried. Pelletier said defense attorneys know employees who cooperate early get the best deals from prosecutors.

“When prosecutors credibly cable the public that they are rewarding employees and going after the scammers, company executives pay attention,” he said.

Ellison, 28 and the daughter of a professor, has pleaded guilty to seven counts. Wang, who recently compiled a Forbes billionaires list, pleaded for four, according to prosecutors. Both were released on bail.

The plea agreements for Ellison and Wang said prosecutors would recommend reduced sentences if they “substantially assist” the investigation.

Bankman-Fried was the face of FTX and its vast network of companies. He has appeared on stages around the world, flanked by politicians, celebrities and athletes, promoting FTX and crypto in general.

The Securities and Exchange Commission and Commodity Futures Trading Commission, which investigated FTX’s collapse, also announced on Wednesday that they would be suing Wang and Ellison.

The SEC claimed that Ellison and Wang participated in a multi-year scheme to defraud FTX investors. Between 2019 and 2022, “Ellison, on orders from Bankman-Fried, manipulated the price of FTX’s native token FTT by buying large amounts on the open market, according to the SEC complaint.

The securities regulator also said that Ellison and Wang knew, or should have known, that Bankman-Fried was falsely promoting FTX as a secure crypto trading platform, while at the same time improperly transferring client funds from FTX to Alameda.

The SEC said Ellison and Wang are cooperating in their ongoing investigations into other individuals or entities that may be connected to FTX’s wrongdoing.

The CFTC’s complaint, which also alleges fraud, accuses Ellison of directing Alameda to use billions of dollars in FTX funds, including client funds, to trade on other crypto exchanges and pay for high-risk investments. According to that lawsuit, Wang “created features in the code underlying the FTX trading platform that enabled Alameda to maintain an essentially unlimited line of credit on FTX.” The CFTC said the two former executives did not deny liability for their claims.

Ellison, former CEO of Alameda, Wang and his colleague Nishad Singh formed the backbone of Bankman-Fried’s inner circle. Singh has not been charged with any wrongdoing by US authorities. Wang co-founded FTX with Bankman-Fried.

Wang met Bankman-Fried at math camp in high school and was his roommate at the Massachusetts Institute of Technology. Ellison, who knew Bankman-Fried from their time together in the Jane Street quantitative trading business and was previously romantically involved with him, joined Alameda in the early days.