Judge kept FTX execs’ plea bargains secret to get founder to the US
NEW YORK (AP) — A judge agreed to a request by prosecutors to keep it secret that two of Sam Bankman-Fried’s executive associates had turned against him so that the cryptocurrency entrepreneur would agree not to fight extradition from the Bahamas to the United States, according to transcripts of plea deals made public Friday.
U.S. District Judge Ronnie Abrams stated Monday during Manhattan plea proceedings that transcripts of the pleas would be sealed until Bankman Fried reaches New York.
U.S. Attorney Damian Williams announced the guilty pleas Cooperation deals were signed by Carolyn Ellison, 28 and Gary Wang, 29 respectively, while Bankman-Fried flew late Wednesday to Westchester County in the custody FBI agents.
Bankman-Fried (30), appeared at Manhattan federal court Thursday. released on $250 million bail After an electronic monitoring bracelet had been attached to him, he agreed that he would live with his parents in Palo Alto (California) while awaiting trial.
In connection with their pleas, Ellison, former chief executive at Bankman-Fried’s crypto hedge fund trading firm, Alameda Research and Wang, a founding member of FTX, the cryptocurrency exchange, agreed to testify.
Abrams was told by Danielle Sassoon, Assistant U.S. attorney, during Ellison’s plea Monday morning that prosecutors expected Bankman-Fried. consent to extradition on Monday before there were “some hiccups in the Bahamian courtroom.”
“We’re still expecting extradition soon, but given that he has not yet entered his consent, we think it could potentially thwart our law enforcement objectives to extradite him if Ms. Ellison’s cooperation were disclosed at this time,” Sassoon told Abrams.
Ellison’s defense lawyer gave assurances to the judge that there was no objection before granting the request.
“Exposure of cooperation could hinder law enforcement officials’ ability to continue the ongoing investigation and, in addition, may affect Mr. Bankman-Fried’s decision to waive extradition in this case,” Abrams said.
Bankman-Fried is facing criminal charges were revealed on Dec. 13Prosecutors claimed that the entrepreneur started defrauding customers after FTX’s 2019 foundation by illegally diverting funds to cover expenses, debts, and risky trades at Alameda. Alameda was established in 2017.
At a news conference, Williams called the crimes that enabled Bankman-Fried to make lavish real estate purchases and large political donations “one of the biggest frauds in American history.”
Ellison stated that since FTX & Alameda were her pleas collapsed in November, she has “worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation.”
“I am truly sorry for what I did. I knew it was wrong. And I want to apologize for my actions to the affected customers of FTX, lenders to Alameda and investors in FTX,” she said.
Ellison stated that she knew that Alameda had access to a FTX.com borrowing facility from 2019 to 2022, which allowed Alameda negative currency balances.
According to her, the arrangement had the practical effect of allowing Alameda to access an unlimited credit line without the need to provide collateral. Also, the agreement did not owe interest on negative balances nor was it subject to liquidation protocols or margin calls.
Ellison claimed she knew that if Alameda’s FTX accounts showed significant negative currency balances, it meant Alameda was borrowing funds that FTX customers had deposited into her exchange account.
“While I was co-CEO and then CEO, I understood that Alameda had made numerous large illiquid venture investments and had lent money to Mr. Bankman-Fried and other FTX executives,” she said.
Ellison claimed she understood that Alameda had borrowed short-term and longer-term loans in excess of $1.5 billion from cryptocurrency industry lenders.
She claimed that many of the loans she had taken were recalled in June by lenders. She agreed to lend several billion dollars to FTX to pay them back.
“I understood that FTX would need to use customer funds to finance its loans to Alameda,” she said. “I also understood that many FTX customers invested in crypto derivatives and that most FTX customers did not expect that FTX would lend out their digital asset holdings and … deposits to Alameda in this fashion.”
Ellison claimed that she had agreed with Bankman Fried and other financial advisors to present misleading financial statements to Alameda’s lenders from July through October. These included quarterly balance sheets that covered the amount of Alameda’s borrowing as well as the billions in loans Alameda made to FTX executives, and related parties.
She claimed she was aware that FTX did not disclose to its investors that Alameda had the ability to borrow unlimited amounts from FTX. This put their assets at risk.
“I agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda’s credit arrangement,” Ellison said.
During his plea earlier Monday, Wang said that between 2019 and 2022 while working at FTX, he was “directed to and agreed to make certain changes to the platform’s code” to give Alameda special privileges.
“I did so knowing that others were representing to investors and customers that Alameda had no such special privileges and people were likely investing in and using FTX based in part on those misrepresentations,” he said. “I knew what I was doing was wrong.”