The co-founder of FTX pleaded guilty and is sentenced to 50 years in prison.

Two top FTX executives have pleaded guilty and are cooperating with prosecutors: FTX co-founder Gary Wong and Alameda Research CEO Caroline Ellison. Both were convicted for “their role in the fraud that contributed to the collapse of FTX,” Damian Williams, the U.S. Attorney for the Southern District of New York, said at a news conference.

Statement of US Attorney Damian Williams on US v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz

– US Attorney SDNY (@SDNYnews) December 22, 2022

Allison, the former CEO of FTX subsidiary Alameda Research and ex-girlfriend of crypto exchange founder Sam Bankman-Fried, pleaded guilty to seven counts and faces up to 110 years in prison. FTX co-founder Gary Wong pleaded guilty to four counts and faces up to 50 years in prison. However, they are now cooperating with the prosecutor’s office, so they can receive a lighter sentence.

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Ellison and Wong also face civil fraud charges from the Securities and Exchange Commission (SEC) and the Commodity Trading Commission (CFTC). Both were released on $250,000 bail.

The announcement came as Bankman-Fried was extradited from the Bahamas to New York, adding to his legal troubles. Wong’s attorney, Ilan Graff, said his client “has taken responsibility for his actions and takes seriously his obligations as a cooperating witness,” according to The Washington Post.

Despite their cooperation, the SEC did not hold back in its actions against Ellison and Wong.

“Mr. Benkman-Fried, Ms. Allison and Mr. Wong were active participants in the scheme to conceal material information from FTX investors. By secretly transferring FTX customer funds to Alameda, the defendants concealed the very real risks faced by investors and customers of the crypto exchange,” said SEC Deputy Director of Enforcement Sanjay Wadhwa.

Bankman-Fried, meanwhile, has been charged with multiple crimes by multiple agencies, including the SEC, the Department of Justice and the CFTC. The charges include defrauding FTX investors and customers of more than $1.9 billion, multiple counts of fraud, conspiracy to defraud investors by providing false information and “secretly” withdrawing customer funds.

The CFTC also alleges that Bankman-Fried and his allies “received hundreds of millions of dollars in poorly documented “loans” from Alameda,” which they then used to purchase real estate and make political donations.

Timeline of the fall of FTX

On November 2, Coinbase published a report that revealed that Sam Bankman-Fried’s crypto exchange was facing a liquidity crisis. In response to the article, Binance CEO Changpeng Zhao announced that the company would sell about $529 million worth of FTT (the FTX token), prompting the token to drop more than 70% to around $6.

It was later reported that Binance was buying FTX, and the owners had only signed a “letter of intent” — which actually meant that the deal was non-binding. So later, Zhao, having read the financial documents of FTX, changed his mind about rescuing the competitor. FTX’s failure caused a contagion that led to financial problems at several other companies. The flagship cryptocurrency, Bitcoin, was predicted to fall below $12,000.

On November 11, FTX declared bankruptcy. Sam Bankman-Fried stepped down, replaced by Enron restructuring veteran John J. Ray III as CEO. About 130 additional subsidiaries, including FTX US and Alameda Research, also filed for bankruptcy. Within a few weeks, it became known that a “significant amount” of the crypto exchange’s assets had disappeared or been stolen.

In December, reports surfaced that the US Attorney’s Office was investigating Sam Bankman-Fried for his possible involvement in the “death spiral” of stablecoin TerraUSD (UST) and its related token Luna. A few days later, the FTX founder was arrested in the Bahamas after the US government filed criminal charges against Bankman-Fried and said it intended to seek his extradition from the country where he lived and which served as FTX’s base of operations.

Source: Engadget