Caroline Ellison and Gary Wang charged with fraud

GB Market Commentary 22/12/2022

by Marcus Sotiriou

Caroline Ellison, CEO of Alameda Research, and Gary Wang, FTX co-founder, have pled guilty to fraud. It was announced yesterday that the Southern District of New York (SDNY) Department of Justice (DOJ) filed charges against the pair, who have been co-operating with law enforcement.

In addition, the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) charged Ellison and Wang on the same day. In a statement the CFTC said, “Caroline Ellison and Gary Wang acknowledge liability.”

US attorney Damian Williams said that “[law enforcement] is moving quickly and our patience is not eternal.” Williams added also said that FTX co-founder Sam Bankman-Fried (SBF) is now in custody with the U.S. Federal Bureau of Investigation (FBI) and is “on his way back to the United States.”

The SEC press statement said, “Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price. FTT served as collateral for undisclosed loans by FTX of its customers’ assets to Alameda, a crypto hedge fund owned by Wang and Bankman-Fried and run by Ellison.”

The CFTC confirmed rumours about code being built that allowed FTX to benefit Alaemda Research, as they claimed, “as alleged in the amended complaint, Wang created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX.”

It is astounding to see how fast things have folded, as just over a month ago hardly anyone knew about the fraudulent activities. I think this will benefit public perception of the crypto industry, as people can be fully assured that this collapse is due to fraud as opposed to an inherent problem with crypto.