Last night, the Department of Justice for the Southern District of New York said it had indicted Caroline Ellison, former CEO of cryptocurrency hedge fund Alameda, and FTX co-founder and former CTO Gary Wang, with criminal fraud. In addition to being a shareholder of the FTX cryptocurrency exchange, Wang co-owned Alameda with Sam Bankman-Fried (SBF).

“Both Ms. Ellison and Mr. Wang have pleaded guilty to those charges and are both cooperating with the Southern District of New York.” said US Attorney Damian Williams.

The news is not a big surprise since Twitter photo it showed Ellison buying coffee in New York on December 4.

Additionally, the SEC charged the two with civil fraud, and they have settled those charges as well.

On December 12, FTX CEO Sam Bankman-Fried was indicted for fraud over the FTX collapse by the Justice Department, SEC, and CFTC. Criminal charges include customer wire fraud as well as seeking political influence by violating campaign finance laws. In the Bahamas, SBF waived his right to an extradition hearing yesterday and was detained by the FBI and transported to the United States.

SEC Alleges FTT Token Price Was Manipulated

The SEC alleges that, following SBF’s instructions, Ellison manipulated the price of the FTT token that was used as collateral for the Alameda loans.

Regarding Wang, it is alleged that he wrote the code to divert FTX client funds to Alameda, and “Ellison, in turn, used the embezzled FTX client funds for Alameda’s business activity”, claims the complaint.

The SEC targets fraud against US investors in FTX, and to prove fraud it is necessary that there was a loss due to misrepresentation.

Thus, the lawsuit alleges that SBF “told investors and potential investors that FTX had sophisticated, world-class automated risk measures in place to protect client assets, that those assets were safe and secure, and that Alameda was just another client of the platform without special”. privileges. The defendants knew or were reckless in not knowing that these statements were false and misleading.”

The special deal was the almost unlimited line of credit that FTX gave Alameda. But, in addition, Alameda borrowed from third-party lenders using the FTT token as collateral.

As part of the SEC settlement, Ellison and Wang have to turn over any “ill-gotten gains,” cannot participate in future securities issuances, including crypto assets, a ban on being an officer or director, and a civil penalty.

Another colleague, Ryan Salame, co-CEO of FTX Digital, informed the Bahamas Securities and Exchange Commission on November 9 that the FTX funds had been transferred to Alameda. Salame, a qualified accountant, made more than $24 million in financial contributions to Republican election campaigns, according to the Federal Election Commission.

However, Salame was not directly mentioned in the announcement by the New York prosecutor, who also stated: “If you engaged in misconduct at FTX or Alameda, now is the time to come forward. We are moving quickly and our patience is not eternal.