Sam Bankman-Fried’s problems worsen as the CEO of Alameda Research and co-founder of FTX reach plea agreements.
Sam Bankman-Fried has been subtly blaming Caroline Ellison for the demise of FTX while appearing to be trying to get ahead of the widely anticipated cooperation agreement with prosecutors.
However, Sam Bankman-Fried was brutally stinged when Manhattan US Attorney Damian Williams finally announced Ellison’s plea deal on Wednesday night because federal prosecutors also had a deal with Gary Wang, his co-founder of FTX. Wang was a more dangerous witness for Bankman-Fried because he was so much more important to FTX than Ellison.
Through Alameda, the cryptocurrency exchange’s sister trading house, Sam Bankman-Fried, 30, is accused of orchestrating a long-running fraud in which he used billions of dollars in FTX customer funds for personal expenses and high-risk wagers.
Sam Bankman-Fried was released on a$ 250 million bond on Thursday after making his first appearance in court in the US after being extradited from the Bahamas. He has not yet entered a defense plea. A request for comment was not immediately answered by a Bankman-Fried spokesperson.
Sam Bankman-Fried has attempted to claim in media interviews that he was unaware of what was going on in Alameda, which 28-year-old Ellison fled from Hong Kong while visiting the Bahamas. That suggests that he was more responsible for FTX’s demise than fraud. Wang, 29, who shared a base with Bankman-Fried in the Bahamas and served as FTX’s chief technology officer, does not, however, fit that description.
Former New York federal prosecutor Sarah Paul said, “I anticipate it will be more challenging for him to claim he had no knowledge of what Wang was up to.”
FTX partners who are close
Another former federal prosecutor, Renato Mariotti, claimed that Sam Bankman-Fried might have intended to claim that his romantic interest in Ellison clouded his judgment. Wang and I would find it more difficult to argue that.
At the Massachusetts Institute of Technology, Wang, 29, and Sam Bankman-Fried first met while attending a math camp in high school. Wang wrote the code for the exchange that would go live in 2019 as they shared a home in Berkeley, California, where they began working on FTX.
Both Wang and Ellison entered guilty pleas to counts of fraud that carry sentences of up to ten years in prison. But based on their cooperation, prosecutors almost always recommend leniency. Additionally, the Securities and Exchange Commission and the Commodity Futures Trading Commission have both agreed not to contest liability in concurrent civil lawsuits.
Wang is accused of contributing to the development of the underlying code that allowed Alameda to “maintain an unlimited line of credit” at FTX. The regulator claimed that Wang also contributed to the development of additional pathways, such as quicker execution times, that unfairly favored Alameda when conducting business on the platform.
extremely potent combination
According to legal experts, it is very difficult to explain the money’s transfer to Alameda as mismanagement rather than fraud, and Sam Bankman-Fried could suffer greatly from the testimony of his former colleagues. When confronted by these witnesses, defendants in other white-collar cases attempted to portray the cooperators as the real bad actors who were now lying to protect their own reputations.
However, according to the government, Bankman-Fried was in charge of Alameda and FTX from the start and set them up to defraud investors and customers. Sam Bankman-Fried served as the trading firm’s CEO until late last year, when he hired Ellison. He owned 90% of Alameda, compared to Wang who owned 10%.