Former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang are in the crosshairs of the SEC.
They have faced criminal charges and are cooperating with an ongoing criminal investigation.
Here are the biggest takeaways from the SEC’s parallel civil case against them.
Caroline Ellison, the former CEO of Sam Bankman-Fried’s trading firm Alameda Research, was sued Wednesday in New York, along with a civil complaint filed by the U.S. Securities and Exchange Commission.
The development confirmed speculation that Ellison — who is also Bankman-Fried’s ex-girlfriend — and other members of Bankman-Fried’s circle were working with federal prosecutors investigating the FTX collapse.
U.S. Attorney Damian Williams said Wednesday that Ellison and FTX co-founder Gary Wang pleaded guilty to various charges, including fraud, and were cooperating with the government.
The SEC allegations tell the story of Bankman-Fried’s control of Alameda, of which he owned 90%, and portray him as the mastermind of a plan to bring large cash flows into the company by pulling leveraging FTX client funds and manipulating FTT token trading. to increase its value.
Ellison and Wang, according to the agency, were loyal deputies executing that vision.
Here are the biggest takeaways and allegations, according to the SEC complaint:
1. SBF was calling the shots. The SEC complaint often referred to Ellison taking action based on “Bankman-Fried’s instructions,” reiterating the agency’s earlier allegation that it was Bankman-Fried who orchestrated the apparent scheme.
2. Even as co-CEO of Alameda, Ellison didn’t pull all the strings. The SEC alleged that “although Ellison made certain business decisions, she frequently consulted with Bankman-Fried, particularly on strategic matters and material transactions.”
3. Yet Ellison and Wang perpetuated the alleged fraud of FTX investors and customers, according to the SEC.
4. As far as investors are concerned, FTX raised $1.8 billion based on what the agency says were bogus assurances from Bankman-Fried and others about sound risk protocols.
5. Ellison knew that risk protocols were not what SBF professed to investors.
6. The agency alleges the three defendants worked together to help Alameda Research, the separate company founded by Bankman-Fried, get “special treatment.” This gave the company wide access to funds from FTX clients – and Ellison knowingly traded at Alameda using that money. The agency claimed that this summer alone they transferred “hundreds of millions” of FTX client funds to Alameda.
7. Ellison also asked Alameda to borrow “billions of dollars” from lenders using FTT tokens as collateral. Ellison and Bankman-Fried then also worked to increase the value of these tokens so that Alameda could continue to borrow more.
8. As deficits piled up, Ellison and Bankman-Fried continued to mislead investors.
9. The complaint largely paints Bankman-Fried as one who gives allegedly fraudulent assurances to investors, but casts Ellison and Wang as loyal facilitators.
10. The SEC reiterated how Bankman-Fried used the alleged scheme to his own advantage, saying that “Bankman-Fried also used mixed funds from Alameda to make large political donations and purchase tens of millions of dollars. in Bahamas real estate for himself, his parents, and other FTX executives.” The agency added that Wang took around $200,000 “for his own purposes.”
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