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FTX co-founder and Alameda CEO plead guilty to fraud

By Alara Jordan

12:08, 22 December 2022

Sam Bankman-Fried
Caroline Ellison, above, has pleaded guilty to seven counts of fraud – Photo: Alameda

FTX co-founder Gary Wang and the chief executive of Alameda Research, Caroline Ellison, have pleaded guilty to fraud charges for their participation in a “multiyear scheme” to defraud FTX investors, according to a statement by the US Securities and Exchange Commission (SEC).

Both parties have also agreed to co-operate with US authorities amid the ongoing investigation around the collapse of FTX, as well as pleading guilty to fraud charges, Damian Williams, United States Attorney for the Southern District of New York (SDNY), confirmed on Wednesday.

Williams said: “I'm announcing that SDNY has filed charges against Caroline Ellison [...] and Gary Wang [...] in connection with their roles in the frauds that contributed to FTX's collapse. Both Ms Ellison and Mr Wang have plead guilty to those charges and both are cooperating with the SDNY.”

“Let me reiterate a call I made last week,” Williams said. “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.”

Ellison was last spotted in New York as of 15 December, prompting allegations that she could be working with authorities to build a case against FTX and its former boss Sam Bankman-Fried.

The statement by the SEC claims that both Ellison and Wang were “active participants” in the scheme to deceive FTX’s investors, and both parties engaged in conduct that was critical to its success. 

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-1.830% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 1.20

BTC/USD

67,660.40 Price
+0.800% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

ETH/USD

3,540.64 Price
+0.820% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

XRP/USD

0.60 Price
+3.710% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

It adds that Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda, with Wang building a specific software service, or “backdoor” scheme, that would allow Bankman-Fried to divert FTX customer funds to Alameda for the firm's trading activity.

The document says: “The complaint further alleges that, even as it became clear that Alameda and FTX could not make customers whole, Bankman-Fried, with the knowledge of Ellison and Wang, directed hundreds of millions of dollars more in FTX customer funds to Alameda.”

The chair of the US Securities and Exchange Commission, Gary Gensler, said, “As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards.”

FTT to USD

Newly released US court documents show that Ellison has pleaded guilty to seven counts of fraud, including the conspiracy to commit wire fraud on customers of FTX, conspiracy to commit wire fraud on lenders of Alameda Research and conspiracy to commit money laundering, all of which count a maximum sentence of 110 years.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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