A former chief executive of a trading firm closely associated with FTX said she was “really sorry” for defrauding customers, investors and lenders by pleading guilty to criminal charges following the collapse of the cryptocurrency exchange last month.
“I knew it was wrong,” Caroline Ellison, the former executive, told a Manhattan federal judge on Monday when she filed her plea of guilty, according to a transcript of the hearing unsealed on Friday.
Ms. Ellison, 28, has agreed to help federal prosecutors build their case against Sam Bankman-Fried, the disgraced founder of FTX and co-founder of Alameda Research, the trading company Ms. Ellison had run.
Mrs. Ellison made confessions that offered a glimpse of how she could be a powerful witness against Mr. Bankman-Fried. She said she agreed with Mr. Bankman-Fried and others’ decision not to disclose the close relationship between FTX and Alameda, and the decision to divert billions in customer deposits at FTX to pay off loans from Alameda .
“I have agreed with others to borrow several billion dollars from FTX to repay those loans,” Ms. Ellison told Judge Ronnie Abrams of the U.S. District Court for the Southern District of New York.
What you need to know about the collapse of FTX
What is FTX? FTX is a now-bankrupt company that used to be one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. Based in the Bahamas, the company built its business on risky trading options that are not legal in the United States.
Ms. Ellison said she wanted to apologize to FTX’s clients and investors as well as Alameda’s backers.
Mr Bankman-Fried, 30, faces multiple criminal charges stemming from what prosecutors say was a multi-year scheme that defrauded customers, investors and lenders. Authorities allege he orchestrated a scheme that embezzled billions in client deposits to fuel trade at Alameda, pay off loans, buy lavish real estate, lend money to FTX executives and make tens of millions in campaign contributions. to deserve.
He was extradited from the Bahamas, where FTX was based, on Wednesday after his arrest there on December 12. A Manhattan federal magistrate approved the release of Mr. requires him to be confined to his parents’ Northern California home and to wear an electronic surveillance bracelet.
On Wednesday evening, as Mr. Bankman-Fried was flown to the United States, Damian Williams, the US Attorney for the Southern District of New York, announced that Ms. Ellison and another former FTX executive, Zixiao Wang, known as Gary Wang, both pleaded guilty to fraud charges and cooperated with the government’s investigation into Mr. Bankman-Fried.
Mr Wang also entered his plea on Monday, just hours before Ms Ellison appeared in court. Mr Wang told Judge Abrams he knew what he was “doing was wrong”, according to a transcript of the proceedings, which was also unsealed on Friday.
Late Friday, Judge Abrams said she was withdrawing from any future involvement in the case because Davis Polk & Wardwell, the law firm where her husband is a partner, had worked for FTX in 2021. She said her husband was not involved in legal representation, but she did so to “avoid any potential conflict or the appearance of it.”
The aftermath of FTX’s demise
The sudden collapse of the crypto exchange has stunned the industry.
Monday’s IOU transcripts also show prosecutors were concerned about what might happen if Mr Bankman-Fried learned that his two former executives pleaded guilty and cooperated with the government before agreeing to be extradited from the Bahamas.
That same Monday, Mr. Bankman-Fried are extradited and flown back to the United States. But in a court case in the Bahamas, his lawyer there said his client was not ready to waive extradition.
Mr. Bankman-Fried was then returned to Fox Hill Prison in the Bahamas where he had been held.
The transcript of Ms. Ellison’s plea shows that by the time her hearing began at 4:30 p.m., Mr. Bankman-Fried was still in the Bahamas.
At the hearing, with uncertainty about when Mr. Bankman-Fried was due to leave the Bahamas, the government asked Judge Abrams for the transcript of Ms. temporarily seal Ellison and delay its public registration.
“It was our expectation that he would agree to extradition today,” Danielle Sassoon, an assistant US attorney, told the judge, adding, “There have been some hiccups in the Bahamian courtroom.”
