- Alameda Research borrowed billions of dollars in customer funds from the FTX exchange.
- The company’s debt was then masked under a pseudonymous account on FTX.
- Caroline Ellison and Gary Wang have pleaded guilty to numerous fraud charges.
The case of “Where did the money go?” of the virtual currency exchange FTX is beginning to be clarified.
On November 11, exchange founder Sam Bankman-Fried filed for Chapter 11 bankruptcy protection against FTX and about 130 of its affiliates. The decision came after a flood of withdrawals and the exchange’s lack of liquidity.
Bankman-Fried arrived in the mainland United States on Wednesday after being extradited from the Bahamas. The Associated Press on Friday U.S. judge reported keeping secrets Two of his former colleagues, Alameda CEO Caroline Ellison and FTX co-founder Gary Wang, pleaded guilty to fraud charges and cooperated with the federal government. Prosecutors feared Bankman-Fried would fight extradition if he knew his partner was turning against him.
Alameda Research, a trading and investment fund founded by Bankman-Fried, borrowed billions from exchanges and suffered losses in a series of bad trades and trades. It was later revealed that the money was from a customer’s deposit.
a Lawsuit by the Commodity Futures Trading Commission On December 13, Bankman-Fried said it directed FTX executives to move Alameda’s approximately $8 billion in debt to an unknown customer account in FTX’s system.
The lawsuit also claimed that Bankman-Fried would later refer to the account as “our Korean friend’s account” and/or a “weird Korean account.” He added that he did not have the investment firm’s email identifier “@alameda-research.com”. The note associated with the account was labeled “FTX fiat old”.
The lawsuit alleges that this helped mask Alameda’s negative balance on FTX.
The next day, December 14th, reported by Bloomberg A GitHub account named Nishad Singh, a former director of engineering at FTX, created code to hide Alameda’s ballooning debt on the exchange.
The implosion of FTX sent shockwaves through the entire cryptocurrency community. Months before the bankruptcy, Bankman-Fried assured investors that the worst of the crypto market liquidity crisis was likely behind them. He added he still had “billions” on hand To strengthen struggling companies that could further destabilize the digital asset industry.
Bankman-Fried appeared in New York federal court on Thursday after being released on $250 million bail.
December 18th, Ellison pleaded guilty to seven counts of federal fraud, including conspiracy to wire fraud against FTX customers and money laundering. She could face up to her 110-year prison sentence, but she agrees to cooperate fully in exchange for a reduced sentence.
Wang pleaded guilty to four similar charges. He could face up to his 50 years in prison and has also agreed to cooperate with the federal government.