The United States Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) have brought new fraud allegations against Caroline Ellison, former CEO of Alameda Research, and Gary Wang, former co-founder of FTX.
This follows the duo’s guilty plea to federal fraud charges brought by the U.S. Department of Justice (DOJ) on December 22.
Ellison entered a guilty plea to four counts of conspiracy, two counts of wire fraud, two counts of commodities fraud, two counts of securities fraud, and two counts of conspiracy to launder money.
Wang also pleaded guilty to conspiracy to commit securities fraud, conspiracy to commit commodities fraud, conspiracy to commit wire fraud, and conspiracy to commit wire fraud.
According to the SEC, Ellison and Wang were charged for their involvement in the multiyear scheme to deceive equity investors in FTX. The SEC is also investigating whether other securities laws were violated.
According to the press release SEC stated:
“The Securities and Exchange Commission today charged Caroline Ellison, the former CEO of Alameda Research, and Zixiao (Gary) Wang, the former Chief Technology Officer of FTX Trading Ltd. (FTX), for their roles in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
The SEC claims that Ellison advanced the scheme by manipulating the price of FTX Token FTT, which is referred to as a crypto security token in the report, at the request of former FTX CEO Sam Bankman-Fried. The stated price manipulation, which occurred between 2019 and 2022, involved buying huge amounts of the product on the open market to support its price.
SEC stated:
“The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda’s FTT holdings to be inflated, which in turn caused the value of collateral on Alameda’s balance sheet to be overstated, and misled investors about FTX’s risk exposure.”
Ellison and Wang have been added as defendants in the CFTC’s fraud charges following revisions to the complaint originally filed on December 13 against Samuel Bankman-Fried, FTX Trading, and Alameda Research.
The amended complaint accuses all defendants, including Ellison and Wang, of participating in a fraudulent scheme. Specifically, Wang is accused of committing fraud in the sale of digital asset commodities through interstate commerce. Ellison is accused of committing fraud and making significant misrepresentations in the sale of digital asset commodities.
CFTC Chairman Rostin Behnam stated:
“With today’s charges we continue to move aggressively to hold all individuals who commit fraud accountable and protect customers from additional harm and losses. In the absence of a comprehensive regulatory framework over digital assets, the CFTC will use all of its existing power and authority to protect all market participants, while ensuring the integrity of commodity markets.”
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) allege that Wang wrote the software code for FTX that enabled Alameda to transfer customer funds from FTX to Ellison, who then used the funds for Alameda’s trading activity.
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