Sam Bankman-Fried’s lieutenant Caroline Ellison faces fraud charges for manipulating the FTX crypto price
The legal ramifications of FTX’s collapse took a new turn on Wednesday night when the Justice Department and the Securities and Exchange Commission announced charges against co-founder Sam Bankman-Fried’s one-time girlfriend, Caroline Ellison, with the SEC claiming she had the price of the Failure FTT token manipulates the exchange.
A close lieutenant of Bankman-Fried for years, Ellison served as CEO of his hedge fund Alameda Research, which has been accused of raiding FTX client funds to prove its trading losses. That New York Times confirmed recent speculation that she was cooperating as a witness with the Justice Department’s investigation into Bankman-Fried’s alleged criminal activities and reported that Ellison had pleaded guilty.
In a press conference, a prosecutor from the Ministry of Justice announced The agency had filed criminal fraud charges against Ellison and FTX Chief Technology Officer Zixiao (Gary) Wang.
According to the SEC, Ellison participated in a program to prop up the price of the FTT token — which FTX used as collateral for unsecured loans — in the open market.
“The complaint alleges that by manipulating the FTT price, Bankman-Fried and Ellison caused an inflated valuation of Alameda’s FTT holdings, which in turn caused the value of the collateral to be overstated on Alameda’s balance sheet, and investors were misled regarding FTX’s risk exposure,” the SEC said in a press release on the charges.
In the case of FTX manager Wang, the SEC alleges that he improperly diverted client funds to Alameda.
The SEC does not have the power to criminally punish individuals, meaning the charges carry no risk of jail time. Instead, the agency is seeking to ban Ellison and Wang from trading in securities and is attempting to reclaim any profits they made from the alleged scheme.
Meanwhile, Bankman-Fried, who is facing a slew of criminal charges, was transferred from the Bahamas jail to a Brooklyn jail on Wednesday night.
The news about Ellison comes two weeks after she was spotted at a New York coffee shop, which has fueled rumors that she is a cooperating witness – although the agency or Ellison have not confirmed this.
In its announcement, the SEC said both Ellison and Wang had worked with the agency and reached a settlement regarding certain allegations.
This story has been updated from the original to provide additional details.
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