Several top executives of fraudulent crypto corporation FTX, including Caroline Ellison, ex-girlfriend of Sam Bankman-Fried (SBF) have pleaded guilty to fraud and have agreed to cooperate with the prosecutors which may lead to hundreds of years of imprisonment for SBF.
Bankman-Fried is accused of a long list of misdeeds by multiple agencies, including the Securities and Exchange Commission (SEC), Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC). Those include defrauding FTX investors and customers of more than US$1.9 billion, multiple counts of wire fraud, conspiracy to defraud investors by sharing misleading information and surreptitiously siphoning customer funds. The CFTC also alleges that Sam Bankman-Fried and his cohorts “took hundreds of millions of dollars in poorly-documented ‘loans’ from Alameda”, an organization run by Caroline Ellison, which they then used to purchase real estate and make political donations, majority of which went to the Democratic Party.
According to Reuters report, top FTX executives close to Sam Bankman-Fried, Caroline Ellison and Zixiao “Gary” Wang, have pleaded guilty to fraud and are cooperating with prosecutors. The pair were convicted “in connection with their roles in the fraud that contributed to FTX’s collapse”, said Damian Williams, the US Attorney for the Southern District of New York in a press conference.
Caroline Ellison, the former CEO of FTX sister company Alameda Research and ex-girlfriend of Sam Bankman-Fried, pleaded guilty to seven counts and faces up to 110 years in prison. Former FTX co-founder Wang pleaded guilty to four counts and faces 50 years. Depending on the level of cooperation, however, they could receive lighter sentences. The pair also face civil fraud charges filed by the Securities and Exchange Commission (SEC) and Commodity Future Trading Commission (CFTC). Both were released on US$250,000 bonds.
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The announcement was made as Bankman-Fried was being extradited from the Bahamas to New York, and add to his mounting legal woes. Wang’s lawyer Ilan Graff said that his client has “accepted responsibility for his actions and takes seriously his obligations as a cooperating witness”.
Despite their cooperation, the SEC did not mince words in laying out its case against Ellison and Wang. “Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors”, said SEC deputy director of enforcement, Sanjay Wadhwa.
“By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced”.
Meanwhile, people are expressing their opinion on this issue on social media and news sites. Here are few of those comments:
Paul: If you trust your money to a gang of 20-year-olds, then it’s assumed that you understood the risks.
Jesse: Both were released on $250,000 dollars bond? And I guess that money is Dirty Money as well!!
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Kerry: Where did the $250,000 come from?
Stephen: Oh Baby – SBF’s hair is going to catch on fire over this turn of events — His mommy/daddy are going to do “something” with bricks that is not comfortable — does Stanford University have new words for these goings on of their prodigies?
Eric: Successful Stanford grads!
Don: Look at Ellison’s father, and look who he employed before said employee became SEC chair.
Marc: But at least these 2 kids knew what fraud is, while SBF is still doing deep dive into its meaning.
John: First to talk gets the best deals, too bad SBF. The I’m just stupid not a fraud defense isn’t looking too good right now.
James: Who are the two guys handling him in this picture? No uniforms, no badges. Probably CIA, as they have been involved in all the recent crypto scandals.
Linda: The Clinton Foundation is making arrangements to ‘take care’ of all these people; can’t have things like the obvious bribery to liberal politicians come to (more) light.
Chris: This is far worse than Bernie Madoff Ponzi scheme.
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Bart: I know the gremlin slash rabbit looking girl is cooperating with prosecutors, but I hope she and the Asian dude don’t get off easy from their plea deal.
Rand: They thought like many that invested that it would just keep climbing and cover what they took. A fool and his money are soon parted.
Meanwhile, Reuters in a report has explained how Sam Bankman-Fried succeeded in getting bail. The report said, FTXfounder Sam Bankman-Fried clinched a bail deal that would see him released on a US$250 million bond secured against his parents’ property with restrictions on his movement.
Here is an explainer on how his deal stacks up and how bail works:
Was Bankman-Fried expected to get bail?
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Defendants are presumed to be eligible for bail unless prosecutors can prove that no set of conditions could ensure that they would return to court. As Bankman-Fried was accused of a white collar, or financial, crime, it would have been surprising if he had not received bail.
How did Bankman-Fried secure bail?
Defendants secure bail by putting up enough of their own assets to cover a portion of their bond.
These so-called bond packages are mixes of assets that can include cash, real estate or anything else of value. They are often co-signed by family members who would be on the hook if a defendant flees.
White collar defendants often have the means to put up bond packages, but defendants with limited assets will often use a bail bondsman.
Bankman-Fried’s bail was secured by his parents Joseph Bankman and Barbara Fried, who offered up their home in Palo Alto, California.
Does the bail amount mean Bankman-Fried or his family has US$250 million?
No. In Bankman-Fried’s case, the US$250 million bond is secured by his parents’ home. Since Bankman-Fried’s parents signed the bond agreement, they would be on the hook for US$250 million if their son flees.
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“They can take everything else”, said Michael Bachner, a New York criminal defense attorney. “They can go ahead and take the bank accounts, the IRA accounts, stock accounts”.
The US$250 million bond does not reflect the family’s assets, which could not be determined. Bankman-Fried said in late November that he now had “close to nothing” left and is down to one working credit card with “maybe US$100,000 in that bank account”.
Is this the largest bail in white collar history?
It’s certainly big. New York federal prosecutors have described Bankman-Fried’s alleged crimes and the collapse of his US$32 billion crypto empire as one of the largest financial frauds in US history. His bond package far exceeds some of the most notorious cases in that history.
“It’s the largest bond I’ve ever heard of in my history of doing bonds”, said Ira Judelson, a prominent New York bail bondsman who specializes in high-profile defendants.
Elizabeth Holmes, the founder of blood testing startup Theranos who was convicted of defrauding investors in January, was released after her 2018 arrest on a US$500,000 bond after surrendering her passport.
The late financier Bernard Madoff, whose US$65 billion Ponzi scheme was the largest in history, was released in 2008 on a US$10 million bond after surrendering his passport and consenting to strict monitoring conditions and curfews.
Will Bankman-Fried be traveling abroad?
Defendants typically have to surrender their passports and wear monitoring devices.
Prosecutor Nicolas Roos told US Magistrate Judge Gabriel Gorenstein that the bail package would require Bankman-Fried to surrender his passport and remain in home confinement at his parents’ Palo Alto home. He would also be required to undergo regular mental health treatment and evaluation.
How long could Bankman-Fried be out on bail?
A while. A trial in New York is likely more than a year away as prosecutors build their case and both sides spar over evidence.
