Alameda Research CEO Caroline Ellison is cooperating with authorities in the FTX crypto case.
This is according to a recent unsealed plea bargain showing the 28-year-old hedge funder is admitting her guilt to all seven counts of fraud levied against her for the active role she is alleged to have knowingly played in the disastrous multi-billion dollar implosion of the FTX group of companies.
The agreement, signed on Monday (Dec. 18) was released by federal prosecutors in the Southern District of New York (SDNY) late Wednesday night (Dec. 21). A paragraph of the document was redacted, leaving information about some of the possible allegations hanging in the air.
Other first lieutenant of the failed cryptocurrency exchange, FTX co-founder and engineering leader Gary Wang pleaded guilty to four charges and agreed to cooperate with the United States Department of Justice (DOJ). Wang was released on bail.
Representatives from both sides have yet to respond to PYMNTS’ request for comment.
Ellison faces a 110-year sentence
The unsealed document shows Ellison admitting his guilt in committing wire fraud on Alameda Research lenders and FTX clients, engaging in conspiracy to commit commodity and securities fraud, and conspiracy to commit money laundering.
“Defendant hereby acknowledges that Defendant has agreed to this Agreement and has elected to plead guilty because Defendant is indeed guilty,” Ellison’s statement said.
The maximum total sentence for his crimes is 110 years.
But while FTX Group founder and failed CEO’s figurehead, Sam Bankman-Fried, is mixed between international prison cells, Ellison so far faces only a fine and forfeiture of assets earned from his time on FTX and Alameda management.
As part of his guilty plea and conditional on his full testimony, the former Alameda Research chief will not face further prosecution by the SDNY bureau beyond his current criminal charges. The settlement depends on Ellison providing “substantial” assistance to the DOJ, as outlined in the settlement. Ellison remains open to prosecution from other offices.
The guilty plea puts further pressure on Bankman-Fried, who has so far maintained his innocence.
As part of the settlement, Ellison will be released on $250,000 bail and will be required to turn over her passport and other travel documents.
“If the defendant fully complies with the arrangements specified in this Settlement, the defendant will not be further prosecuted by this Office,” the SDNY settlement said.
As before reported of PYMNTS, Ellison hired Stephanie Avakian, former head of the enforcement division at the Securities and Exchange Commission (SEC), to represent her.
According to the unsealed document, Ellison remains open to separate prosecutions for any tax crimes or violations she may have committed during the multi-year fraudulent schemes to which she has already admitted guilt and for any tax offenses subsequently disclosed during her testimony.
Alameda’s CEO’s plea deal says she will be kicked out if she is found not to be a US citizen. Though she was born in the United States to academic parents, many observers of the case have speculated that Ellison may have relinquished her citizenship to avoid US taxes, a popular tactic among offshore cryptocurrency traders. She could leave the 28-year-old Stanford graduate open to the aforementioned tax violation penalty.
FTX’s House of Cards reveals that the jokers are left in the deck
Separately, the United States Securities and Exchange Commission (SEC) has charged Ellison and Wang for their roles in a “multi-year scheme to defraud FTX equity investors.”
Wang, who worked as a software engineer at Google before co-founding Alameda and FTX with college friend Bankman-Fried, is accused by the SEC of creating the specific software code that allowed Alameda to divert FTX customers. Ellison is alleged to have used those misappropriated FTX client funds accessed through the encrypted “backdoor” to Alameda’s trading activity.
Bankman-Fried, who kept his innocence in the eight counts of fraud and conspiracy brought against him by the Justice Department, he was extradited from the Bahamas Wednesday night (December 21) and is now in FBI custody.
Ellison and Wang will likely be key witnesses, given their proximity to Bankman-Fried and their knowledge of FTX’s inner workings, admissions of guilt, and stated willingness to cooperate with the prosecution team.
Bankman-Fried is expected to appear before a judge as soon as possible for a bail hearing.
In a public video Regarding the FTX case, US Attorney Damian Williams said, “Today’s announcement will not be the last. If you have engaged in any misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving fast and our patience is not eternal”.
The status or responsibilities of other FTX leaders remain unknown.
These people include Sam Trabucco, the former co-CEO of Alameda along with Ellison; Ryan Salame, who warned the Bahamian government of FTX’s illegal activity; and Nishad Singh, the chief technical officer whose stake in FTX made him a former paper billionaire. Trabucco left the company over the summer, while Salame and Singh were both fired following FTX’s bankruptcy.
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