On Thursday, the United State Securities and Exchange Commission (SEC) charged the former Alameda Research CEO, Caroline Ellison and Former FTX co-founder Gary Wang for allegedly defrauding investors with troubled crypto exchange, FTX. The US regulator announced the charges in its latest Twitter post. SEC, in the announcement, accused the duo of engaging in a multiyear scheme to defraud vulnerable investors.
How Ellison and Bankman-Fried allegedly manipulated the value of FTT
According to SEC, Ellison, through the direction of Bankman-Fried, furthered the scheme between 2019 and 2022 by manipulating the price of FTT, the native token of the troubled FTX. Notably, the former Alameda CEO achieved this by purchasing large quantities of the token on the open market to inflate its price. Further, the SEC maintained that the FTT token, during these periods, served as collateral for undisclosed loans by FTX of its customers’ assets to Alameda. Worthy of note that Alameda and FTX are co-owned by Bankman-Fried and Wang, but run by Ellison.
Notably, SEC alleged that by manipulating the value of FTT, Ellison enabled Alameda’s FTT holdings to become inflated. This, as revealed, led to the overstatement of the collateral value of Alameda’s balance sheet, thereby misleading investors. Also, the agency accused Bankman-Fried of raising billions of dollars from investors by portraying FTX as a safe trading platform. According to the charges, SBF also portrayed Alameda as another customer of FTX with no special privileges. But he, and Wang improperly diverted FTX customer assets to Alameda.
The US regulator said the activities of these FTX executives violate the anti-fraud provisions of the Securities Act of 1933. More so, it said their actions contravenes the securities exchange act of 1934. Occasioned by this, SEC filed for injunctions against future securities law violations. This injunction, if granted, further prohibits the executives from participating in the issuance, purchase, offer, or sale of any securities.
SEC said both Wang and Ellison are cooperating with investigations
Meanwhile, both Wang and Ellison have reportedly plead guilty to the fraud charges. According to SEC, the duo are cooperating with the ongoing investigations. As for Bankman-Fried, the United States Attorney for the Southern District of New York (SDNY) Damian Williams said he is currently on the way to US. Recall that Binbits reported that FTX founder was arrested by authorities in The Bahamas. Just recently, he consented to his extradition to the US. According to reports, the US SEC has already filed criminal charges against SBF. Some of these charges include wire fraud, securities fraud and money laundering.