Bankman-Fried's associates turn on him

Sam Bankman-Fried’s associates turn on him, extending his prison sentence

Bankman-Fried's associates turn on him
Bankman-Fried’s associates turn on him

After the failure of the cryptocurrency exchange he cofounded and led until recently, FTX, am Bankman-problems Fried’s have only worsened.

The former FTX CEO was arrested in the Bahamas at the request of US authorities last week on criminal charges that could lead to a life sentence.

New calls for government regulation have been made in the wake of the FTX’s collapse.
Bankman-Fried, who has denied wrongdoing from the start, is having his role in the fraud that destroyed FTX exposed as his allies turn on him. While he was being extradited to the US last week to face criminal charges, two of his associates pleaded guilty to multiple counts of fraud and conspiracy.

In the past, FTX’s crypto hedge fund Alameda was led by Caroline Ellison, who served as CEO there. The 28-year-old had a short romantic fling with Bankman-Fried. A personal friend of Bankman-Fried, Gary Wang served as FTX’s chief technology officer.

Wang admitted to four counts of fraud, including conspiracy, wire fraud, commodities fraud, and securities fraud. Ellison pleaded guilty to six counts of fraud and conspiracy, including two counts of wire fraud, two counts of conspiracy to commit wire fraud, commodities fraud, securities fraud, and money laundering.

According to Ellison’s testimony in court documents, she and her former associates stole billions of dollars from customers of Bankman-FTX Fried’s exchange and tried to cover it up.

She added that the exchange would have to use customer funds to finance loans to the hedge fund, and that Alameda had a virtually unlimited borrowing facility in FTX.

Bankman-Fried denied allegations that he transferred $10 billion from traders to Alameda, arguing that the two companies are independent of one another. Ellison claimed that she had agreed to keep the unusually close relationship between the companies a secret from customers and investors.

According to transcripts from plea hearings held on December 19, Ellison told the court that from July through October, she agreed with Bankman-Fried and others to provide “materially misleading financial statements to Alameda’s lenders,” and prepared balance sheets that concealed the extent of Alameda’s borrowing.

According to the documents, she also testified that she was aware that FTX executives had set up a plan to provide Alameda with an unlimited line of credit without requiring collateral or charging interest on negative balances.

“I understood that if Alameda’s FTX accounts had significant negative balances in any particular currency, it meant that Alameda was borrowing funds that FTX’s customers had deposited onto the exchange,” Ellison testified in court.

Wang testified before the court that one of his duties at FTX was to modify the exchange’s code in a way that would give Alameda “special privileges” on FTX.

“Between 2019 and 2022, as part of my employment at FTX, I was directed to and agreed to make certain changes to the platform’s code,” Wang said in court. “I executed those changes, which I knew would give Alameda Research special privileges on the FTX platform. I did so knowing that others were representing to investors and customers that Alameda had no such special privileges and people were likely investing in and using FTX based in part on those misrepresentations.”

He continued, “I knew what I was doing was wrong.”

Bankman-case Fried’s has become more serious as a result of the guilty pleas of his co-defendants. With witnesses like Wang and Ellison, the prosecution of Bankman-Fried should move quickly.

In accordance with federal sentencing guidelines, both Wang and Ellison, whose sentencing dates have been set for December 19, 2023, could receive up to 50 and 110 years in prison, respectively. Both men are currently cooperating with federal prosecutors.

According to a statement released by Wang’s lawyer, “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”






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