Caroline Ellison and Gary Wang turn on Sam Bankman-Fried

New York

The shocking collapse of one of crypto’s most prominent companies was soon followed A legal battle pits ex-executives and ex-love partners against each other.

Last week, as was FTX founder Sam Bankman-Fried Handed over to the US From the Bahamas, two of his former business partners pleaded guilty to multiple charges of fraud and conspiracy.

Carolyn Ellison, the 28-year-old former CEO of crypto hedge fund Alameda, pleaded guilty to a federal judge in New York, saying she and her former partners knowingly stole billions of dollars from Bankman-Fried’s FTX exchange clients. Cover it up, according to court transcripts.

“I am truly sorry for what I have done,” Ellison told the court. “I know it’s wrong.”

Ellison told the court that Alameda had unlimited borrowing facilities at FTX and that he knew he was supposed to use client funds to make loans to the hedge fund. He also admitted to hiding the two companies’ unusually close relationship from investors and customers.

From July to October, he told the court, Ellison agreed with Bankman-Fried and others to provide “materially misleading financial statements to Alameda’s creditors” and prepared balance sheets that concealed the amount Alameda had borrowed. December 19 and was unsealed recently.

Ellison has been charged with seven criminal counts, including wire fraud and money laundering. She and Bankman-Fried were close business associates Briefly dated.

According to the transcript, Ellison said FTX executives worked out an arrangement that would allow Alameda access to unlimited credit without having to post collateral or pay interest on negative balances.

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“I understand that if Alameda’s FTX accounts have significant negative balances in any particular currency, Alameda borrows funds deposited by FTX’s customers into the exchange,” Ellison told the court.

Another associate, Gary Wang, FTX’s former chief technology officer, pleaded guilty to four similar charges.

Part of his role at FTX included making changes to the exchange code that gave Alameda “special privileges” at FTX, Wang told the court.

“Between 2019 and 2022, as part of my employment at FTX, I was directed and agreed to make some changes to the site’s code,” Wang told the court. “I implemented those changes knowing that Alameda Research would offer special privileges on the FTX platform. I did so knowing that others were representing to investors and clients that Alameda had no such special privileges.

“I know what I’m doing is wrong,” he added.

Wang pleaded guilty during a trial that began at 11 a.m. on Dec. 19, and Ellison did the same.

Wang faces up to 50 years in prison under federal sentencing guidelines outlined in court. Ellison faces up to 110 years in prison for the seven counts to which he pleaded guilty, according to federal sentencing guidelines.

Both are out on bail as their plea deals are negotiated. Sentencing for Ellison and Wang is scheduled for December 19, 2023.

Both Ellison and Wang cooperated with federal prosecutors, making them damning witnesses against Bankman-Fried, who has repeatedly denied deliberately defrauding clients and investors.

Bankman-Fried, 30, appeared Thursday in a U.S. court in New York, where a federal judge He was released on $250 million bond. He must surrender his passport and be placed under house arrest at his parents’ home in Palo Alto, California.

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While $250 million is an extraordinary sum, Bankman-Fried does not have to pay it unless he violates the terms of his bail agreement or fails to appear in court. A different bail scheme was agreed to as part of his commitment to drop his extradition fight.

Following his court appearance, Bankman-Fried found John F. of New York. Kennedy International Airport in the business class lounge. Crypto reporter Tiffany Fong also tweeted a photo showing Bankman-fried on an American Airlines flight.

Bankman-Fried’s legal team confirmed to CNN Business that she had arrived in Palo Alto and was at home with her parents. Ellison and Wang’s attorney declined to comment on their criminal charges.

A federal judge said Thursday that Bankman-Fried will be arraigned at an unspecified future date on eight felony charges, including fraud and conspiracy.

Prosecutors allege Bankman-Fried orchestrated “one of the largest financial frauds in American history” by stealing billions of dollars from FTX customers to cover losses in Alameda and enrich himself. If convicted, he faces life imprisonment.

Before his arrest in the Bahamas earlier this month, Bankman-Fried tried to portray himself as a hapless entrepreneur who went out on his skis. He repeatedly apologized to customers and FTX employees “f-ed up” At the same time, he denied that he had knowingly cheated anyone.

—CNN’s Lauren Del Valle and Cara Scannell contributed reporting.

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