Alameda Research CEO Caroline Ellison is cooperating with authorities in the FTX crypto case.
That’s according to a recently unsealed plea agreement showing the 28-year-old hedge funder is admitting her guilt to all seven of the fraud charges levied against her for the active role she is accused of knowingly playing in the disastrous, multi-billion-dollar implosion of the FTX enterprise group of companies.
The agreement, signed Monday (Dec. 18,) was released by federal prosecutors for the Southern District of New York (SDNY) late Wednesday night (Dec. 21). A paragraph of the document has been redacted, leaving information about some of the possible charges up in the air.
Another top lieutenant of the failed crypto exchange, FTX co-founder and engineering leader Gary Wang has similarly pled guilty to four charges and agreed to cooperate with the U.S. Department of Justice (DOJ). Wang was released on bail.
Representatives for both parties have yet to reply to PYMNTS’ request for comment.
Ellison Faces 110-Year Sentence
The unsealed document shows Ellison admits her guilt to committing wire fraud on Alameda Research’s lenders and FTX customers, engaging in a conspiracy to commit commodities fraud and securities fraud, and conspiring to commit money laundering.
“The defendant hereby acknowledges that the defendant has accepted this Agreement and decided to plead guilty because the defendant is in fact guilty,” Ellison’s plea stated.
The maximum total sentence carried by her crimes is 110 years.
But while FTX Group founder and failed CEO figurehead, Sam Bankman-Fried, is shuffled between international jail cells, Ellison so far faces only a fine and the forfeiture of assets gained from her time FTX and running Alameda.
As part of her guilty plea and contingent on her full testimony, the former Alameda Research head won’t be further prosecuted by the SDNY office beyond her existing criminal charges. The plea deal hinges on “substantial” assistance being provided by Ellison to the DOJ, as noted in the agreement. Ellison remains open to prosecution by other offices.
The guilty plea puts further pressure on Bankman-Fried, who has so far maintained his innocence.
As part of the deal, Ellison is to be released on a $250,000 bail and must surrender her passport and other travel documents.
“If the defendant fully complies with the understandings specified in this Agreement, the defendant will not be further prosecuted criminally by this Office,” stated the SDNY agreement.
As previously reported by PYMNTS, Ellison hired Stephanie Avakian, a former enforcement division chief at the Securities and Exchange Commission (SEC), to represent her.
According to the unsealed document, Ellison remains open to separate prosecution for any tax-related crimes or violations she may have engaged in during the multiyear fraudulent schemes she has already admitted guilt to and any tax crimes subsequently revealed during her testimony.
The Alameda CEO’s plea agreement says she will be deported if found not to be a U.S. citizen. While born in the U.S. to academic parents, many observers of the case have speculated that Ellison might have given up her citizenship to avoid U.S. taxes – a popular tactic by offshore crypto traders. It may leave the 28-year-old Stanford graduate open to the tax violation prosecution clause mentioned above.
FTX’s House of Cards Reveals Jokers Stayed in the Deck
Separately, the U.S. Securities and Exchange Commission (SEC) has charged Ellison and Wang for their roles in a “multiyear scheme to defraud equity investors of FTX.”
Wang, who worked as a software engineer at Google before co-founding Alameda and FTX with college friend Bankman-Fried, is accused by the SEC of creating the specific software code that allowed Alameda to divert FTX customer funds. It is alleged Ellison used those misappropriated FTX customer funds accessed through the encoded “backdoor” for Alameda’s trading activity.
Bankman-Fried, who has maintained his innocence in the eight criminal fraud and conspiracy counts filed against him by the DOJ, was extradited from the Bahamas Wednesday night (Dec. 21) and is now in the custody of the FBI.
Ellison and Wang will likely be key witnesses, given their proximity to Bankman-Fried and their knowledge of FTX’s inner workings, admissions of guilt, and stated willingness to cooperate with the prosecution team.
Bankman-Fried is set to appear before a judge as soon as possible for a bail hearing.
In a public video regarding the FTX case, U.S. Attorney Damian Williams said, “Today’s announcement will not be our last. If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal.”
The status or liabilities of other FTX leaders remains unknown.
Those individuals include Sam Trabucco, the former co-CEO of Alameda alongside Ellison; Ryan Salame, who tipped off the Bahamian government about FTX’s illegal activity; and Nishad Singh, the engineering director whose equity stake in FTX made him a one-time paper billionaire. Trabucco left the company over the summer, while Salame and Singh were both fired after FTX’s bankruptcy.
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