- The CFTC filed fraud charges against Caroline Ellison and Gary Wang on Wednesday.
- It accused the former FTX and Alameda Research execs of joining SBF in a fraudulent scheme.
- Read the full complaint here.
The Commodity Futures Trading Commission filed charges against Caroline Ellison and Gary Wang on Wednesday, accusing them of participating in a fraudulent scheme that caused FTX customers to lose deposits worth $8 billion.
Ellison, the former CEO of the crypto trading firm Alameda Research, and Wang, the cofounder and former chief technology officer of the crypto trading platform FTX, were added as defendants to a claim initially filed by the CFTC last week against Sam Bankman-Fried, FTX, and Alameda.
Bankman-Fried, who cofounded FTX and Alameda, was arrested in the Bahamas last week and extradited to the US on Wednesday. Federal prosecutors have charged him with eight counts including wire fraud and conspiracy to commit money laundering.
The CFTC said Bankman-Fried, Ellison, and Wang took part in a scheme to misappropriate FTX customer assets for use by Alameda and company executives, including to buy luxury real estate, make political contributions, and carry out investments.
The commission accused Wang of creating code at the direction of Bankman-Fried that allowed Alameda to maintain “an essentially unlimited line of credit on FTX” and to withdraw billions of dollars in FTX customers’ assets.
It alleged that Wang and other FTX executives granted exemptions to Alameda that gave it an “unfair advantage” when transacting on the platform, including quicker execution times and the ability to execute transactions even when it didn’t have sufficient funds available.
“These critical code features and structural exceptions allowed Alameda to secretly and recklessly siphon FTX customer assets from the FTX platform,” the CFTC said in a press release.
The CFTC alleged that Ellison directed Alameda to use FTX funds so it could trade on other digital-asset exchanges and to fund “a variety of high-risk digital asset industry investments.” It alleged that she also made deceptive public statements, including claiming that Alameda and FTX ran separate operations.
The amended complaint charges Ellison with fraud and material misrepresentations and Wang with fraud. The CFTC said Ellison and Wang didn’t contest their liability on its claims.
The US attorney for the Southern District of New York said on Wednesday that both Ellison and Wang had pleaded guilty to fraud and agreed to cooperate with the prosecutors.
On Wednesday the Securities and Exchange Commission also charged Ellison and Wang with participating in a scheme to defraud both FTX’s equity investors and its customers.
The SEC alleged that they were not only aware of actions for which Bankman-Fried is accused but were also “active participants” in the alleged scheme and “engaged in conduct that was critical to its success,” including accusing Ellison of manipulating the price of FTX’s in-house token FTT and accusing both former execs of being aware that Bankman-Fried made “false and misleading” statements to investors.
Read the full CFTC complaint here: