Sam Bankman-Fried Lt. Caroline Ellison Charged With FTX Crypto Price Manipulation Fraud

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The legal fallout from FTX’s collapse took a new turn Wednesday night as the Justice Department and the Securities and Exchange Commission announced charges against co-founder Sam Bankman-Frieds, once-girlfriend Caroline Ellison, the SEC alleging that it manipulated the price of the failed exchange of the FTT token.

Ellison was for years a close lieutenant of Bankman-Fried and served as CEO of his hedge fund, Alameda Research, which is accused of plundering funds from FTX clients to cover trading losses. The New York Times confirmed recent speculation that she is cooperating as a witness with the Justice Department in its investigation into Bankman-Frieds’ alleged criminal activities, and reported that Ellison pleaded guilty.

At a press conference, a Justice Department prosecutor announced that 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 scheme to support the price of the FTT token that FTX used as collateral for unsecured open market loans.

The complaint alleges that by manipulating the price of FTT, Bankman-Fried and Ellison caused an inflated valuation of Alamedas FTT’s holdings, which resulted in an overstatement of the value of collateral on Alamedas’ balance sheet and misleads investors about the risk of FTX. exposure, the SEC said in a press release about the charges.

In the case of FTX executive Wang, the SEC says he improperly diverted client assets to Alameda.

The SEC does not have the power to impose criminal penalties on individuals, which means the charges carry no risk of imprisonment. Instead, the agency is seeking to bar Ellison and Wang from trading in securities and is seeking to recoup any gains they made from the alleged scheme.

Meanwhile, Bankman-Fried, who faces a litany of criminal charges, was moved from a Bahamian jail to a Brooklyn jail starting Wednesday night.

The news about Ellison comes two weeks after she was spotted at a New York cafe, which fueled rumors that she was a cooperating witness, although the agency or Ellison have not confirmed this.

In its announcement, the SEC said Ellison and Wang cooperated with the agency and reached a settlement regarding some of the allegations.

This story has been updated from the original to provide additional details.

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