Bessie Liu

Former crypto billionaire Sam Bankman-Fried will face court over allegations including fraud and conspiracy in the first week of January, but he’ll be addressing a different judge.



Bankman-Fried’s case was initially assigned to 54-year-old district judge Ronnie Abrams. However, Abrams <a href="https://www.innercitypress.com/sdny10cryptoftxsbficp122722.html" target="_blank" rel="noreferrer noopener">recused</a> herself on Friday due to her husband&#8217;s partner role at law firm Davis Polk and Wardwell, which had advised Bankman-Fried’s FTX last year.



Replacing Abrams is Lewis Kaplan, who at 78 has garnered a “no-nonsense” reputation, per <a href="https://www.theguardian.com/business/2022/dec/27/judge-trump-prince-andrew-trials-sbf-sam-bankman-fried-ftx-cryptocurrency" target="_blank" rel="noreferrer noopener">The Guardian</a>. Kaplan was nominated by President Bill Clinton in 1994 and has overseen high profile cases involving Donald Trump, Britain&#8217;s Prince Andrew and Kevin Spacey.



Kaplan is also familiar with crypto fraud. He&#8217;s credited with <a href="https://www.justice.gov/usao-sdny/pr/texas-man-sentenced-operating-bitcoin-ponzi-scheme" target="_blank" rel="noreferrer noopener">sentencing</a> the first ever bitcoin-related federal securities fraud case in 2016, handing down 18 months&#8217; prison (and three years supervised release) to Bitcoin Savings &amp; Trust&#8217;s Trendon Shavers for running a Ponzi scheme.



As for Bankman-Fried, he denied fraud allegations to the media in the leadup to his arrest. He&#8217;s <a href="https://www.reuters.com/legal/sam-bankman-fried-enter-plea-ftx-fraud-case-2022-12-28/" target="_blank" rel="noreferrer noopener">expected</a> to lodge a plea before Kaplan next week. 



Ex-CEO of Alameda Research Caroline Ellison and former chief technology officer Gary Wang have already <a href="https://blockworks.co/news/ftx-alameda-execs-plead-guilty-to-fraud-released-on-bail" target="_blank" rel="noreferrer noopener">pleaded guilty</a> to criminal charges related to the exchange’s collapse.



Ellison pleaded guilty to seven charges including two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, securities fraud and money laundering, court documents show. She faces up to 110 years in prison.



Wang similarly pleaded guilty to four charges including conspiracy to commit securities fraud, commodities fraud and wire fraud. He faces up to 50 years in prison. Both executives have been released on <a href="https://blockworks.co/news/ftx-alameda-execs-plead-guilty-to-fraud-released-on-bail" target="_blank" rel="noreferrer noopener">$250,000</a> bond.



Bankman-Fried, on the other hand, is currently out on a <a href="https://blockworks.co/news/sbf-wont-actually-pay-250m-for-his-bail-bond" target="_blank" rel="noreferrer noopener">record $250 million bond</a> secured by his parents’ California home, where he’s under house arrest throughout the trial.



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SBF’s New Judge Already Sent One Crypto Fraudster to Prison

Shalini Nagarajan

In the FTX saga&#8217;s earliest days, disgraced co-founder Sam Bankman-Fried was actually surprised it hadn’t impacted bitcoin more.



A complaint filed by the Commodity Futures Trading Commission (CFTC) on Wednesday offers a glimpse into messages shared between insiders as the platform collapsed last month.



The CFTC <a href="https://www.cftc.gov/media/8021/enfftxtradingcomplaint122122/download" target="_blank" rel="noreferrer noopener">states</a> that “on the evening of Nov. 6, as they monitored and reacted to the movements in FTT prices and the contagion effects on the digital asset market more broadly,” an unnamed Alameda executive said:



“I’m surprised BTC isn’t down more,” to which former Alameda Research CEO Caroline Ellison responded: “me too.”



Bankman-Fried chimed in: “yea me 3 [sic].”



While bitcoin only faltered 2% around the time of those messages, more than $230 billion was eventually wiped from collective crypto market values in the following days, a 20% reduction.



Bitcoin itself lost more than $100 billion from its market cap in the week leading up to FTX filing for bankruptcy. BTC tanked up to 25%, from $21,300 to below $16,000 at its worst on Nov. 10.



The native exchange token of FTX, FTT, was however completely obliterated, sinking more than 90% in under three days. Alameda Research was <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/" target="_blank" rel="noreferrer noopener">reported</a> to have outsized exposure to FTT (and similarly illiquid tokens) on its balance sheets in the weeks leading up to FTX’s collapse.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" src="https://flo.uri.sh/visualisation/12245717/embed#?secret=2FIpBRpGgc" data-secret="2FIpBRpGgc" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Bitcoin fell harder following Bankman-Fried&#8217;s disbelief on Nov. 6</figcaption></figure>



FTT’s death spiral followed Binance CEO Changpeng Zhao <a href="https://twitter.com/cz_binance/status/1589283421704290306" target="_blank" rel="noreferrer noopener">tweeting</a> his company would liquidate its holdings, estimated to be worth more than $500 million at the time, to reduce risk associated with FTX.



“At this time, bitcoin market prices, including on US exchanges, had indeed begun to decline, likely as a direct or indirect result of the events described herein,” the CFTC said.



Ellison, alongside former FTX and Alameda chief technology officer Gary Wang <a href="https://blockworks.co/news/ftx-alameda-execs-plead-guilty-to-fraud-released-on-bail" target="_blank" rel="noreferrer noopener">pleaded guilty</a> on Thursday to multiple counts of fraud and conspiracy. Both are reported to be cooperating with authorities moving forward, now out on bail. 



Meanwhile, Bankman-Fried is expected to be <a href="https://blockworks.co/news/bankman-fried-set-for-us-extradition-to-face-monster-indictment" target="_blank" rel="noreferrer noopener">imminently extradited to US</a>, where he’ll face his own mammoth eight-count federal criminal indictment.



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SBF, Ellison Thought Bitcoin Would’ve Crashed More As FTX Caved

Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have pleaded guilty to federal criminal charges over their role in fraud which contributed to FTX&#8217;s implosion.



US attorney Damian Williams said Wednesday that the Southern District of New York had filed charges against the pair, with both cooperating with authorities.



Ellison collectively faces seven charges including wire fraud and conspiracy to commit both commodities and securities fraud. They carry a maximum sentence of 110 years in prison, according to a <a href="https://s3.documentcloud.org/documents/23495436/crypto-cooperator-ftx-alamedas-caroline-ellisons-plea-agreement-inner-city-press-on-the-case.pdf" target="_blank" rel="noreferrer noopener">plea agreement</a> with prosecutors.&nbsp;



Wang, who served as chief technology officer at both FTX and Alameda, pleaded guilty to four counts of conspiracy to commit wire fraud and securities fraud. He faces up to 50 years in prison, according to the <a href="https://www.washingtonpost.com/business/2022/12/21/caroline-ellison-fraud-charges/?outputType=amp" target="_blank" rel="noreferrer noopener">Washington Post</a>. They have both reportedly been released on a $250,000 bond.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang <a href="https://t.co/u1y4cs3Koz">pic.twitter.com/u1y4cs3Koz</a>&mdash; US Attorney SDNY (@SDNYnews) <a href="https://twitter.com/SDNYnews/status/1605745361842327552?ref_src=twsrc%5Etfw">December 22, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The Securities and Exchange Commission published an <a href="https://www.sec.gov/news/press-release/2022-234" target="_blank" rel="noreferrer noopener">accompanying civil charge</a> against both former executives “for their roles in a multiyear scheme to defraud equity investors in FTX.”



Between 2019 and 2022, Ellison was directed by former FTX CEO Sam Bankman-Fried to manipulate the price of the exchange’s FTT token by making large purchases to boost its price, the SEC alleged.



This price manipulation caused Alameda’s FTT holdings to be inflated, in turn leading to misrepresentations of the firm’s balance sheet, it added.



Wang was accused of creating a <a href="https://blockworks.co/news/ftx-execs-user-funds-alameda" target="_blank" rel="noreferrer noopener">previously reported</a> backdoor in FTX’s software that enabled Alameda to divert the exchange’s customer funds. Ellison allegedly used these misappropriated funds for Alameda’s trading activity.



“When FTT and the rest of the house of cards collapsed, [Bankman-Fried, Ellison and Wang] left investors holding the bag,” SEC Chair Gary Gensler said in a statement.



<h3>Bankman-Fried closer to facing US court</h3>



The Commodity Futures and Trading Commission separately <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement122122" target="_blank" rel="noreferrer noopener">updated its complaint</a> against Bankman-Fried to add both Ellison and Wang as defendants in “perpetrating an international fraudulent scheme” that led to FTX customer losses of $8 billion. 



It&#8217;s unclear whether FTX co-founder Bankman-Fried intends to lodge a guilty plea. Ilan Graff, Wang’s lawyer, told Blockworks in an emailed statement that his client “has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”



Ellison’s legal representative didn’t return a request for comment by press time. A spokesperson for Sam Bankman-Fried declined to comment.&nbsp;



Bankman-Fried himself was charged and arrested in the Bahamas last week. He is currently in FBI custody, with reports indicating he was extradited to the US late Wednesday.



Updated Dec. 22, 2022 at 3:16 am ET: Clarified date of Bankman-Fried&#8217;s arrest.



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FTX, Alameda Execs Plead Guilty to Fraud, Released On Bail

Caroline Ellison, the disgraced CEO of Alameda Research, has reportedly hired a former US Securities and Exchange director as her lawyer.



Stephanie Avakian, Ellison’s new counsel, previously oversaw high profile cases including those against Theranos fraudster <a href="https://www.sec.gov/news/press-release/2018-41" target="_blank" rel="noreferrer noopener">Elizabeth Holmes</a> and <a href="https://www.sec.gov/news/press-release/2018-226" target="_blank" rel="noreferrer noopener">Elon Musk</a> after he’d tweeted misleading statements about Tesla, per <a href="https://www.bloomberg.com/news/articles/2022-12-10/caroline-ellison-hires-sec-s-former-top-crypto-cop-for-ftx-probe" target="_blank" rel="noreferrer noopener">Bloomberg</a>.&nbsp;



Avakian was also involved in <a href="https://www.sec.gov/news/press-release/2020-338" target="_blank" rel="noreferrer noopener">charging</a> Ripple Labs over its alleged $1.3 billion securities offering (the XRP token sale), as well as discount brokerage Robinhood for <a href="https://www.sec.gov/news/press-release/2020-321" target="_blank" rel="noreferrer noopener">misleading</a> customers about its “payment for order flow” business model.



Avakian is currently a partner at international law firm WilmerHale, which she joined in 2020 after altogether serving six years at the SEC in both deputy director and director roles. Other lawyers at WilmerHale will also be representing Ellison, according to Bloomberg sources.



Still, Ellison recruiting Avakian as her lawyer comes as FTX Group and its former executives are under investigations by federal prosecutors over potential fraud. 



Alameda Research, part of the FTX umbrella, served as market maker, crypto hedge fund and venture capitalist across the crypto space. The firm has been dogged by allegations of misusing FTX user funds for risky bets, eventually leading both firms to file for bankruptcy last month.



Onlookers are <a href="https://blockworks.co/news/maxine-waters-subpoena-sam-bankman-fried" target="_blank" rel="noreferrer noopener">eager</a> to hear from FTX founder Sam Bankman-Fried, who is expected to testify remotely in a Congressional hearing scheduled for Tuesday. Bankman-Fried is still in the Bahamas, he <a href="https://twitter.com/i/spaces/1mrGmkLNVDBxy" target="_blank" rel="noreferrer noopener">said</a> in a Twitter space on Monday. Ellison&#8217;s whereabouts are unknown.



Prospects of Ellison appearing at the hearing alongside Bankman-Fried seem slim. Still, it’s clear Ellison is preparing for an intensive legal fight moving forward.



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Alameda’s Ellison Hires Ex-SEC Lawyer Who Charged Musk, Holmes

Jacquelyn Melinek

<div id="highlights-block_621d2fa3456ea" class="highlights">
 <ul>
 <li>The fund will be a part of the FTX Foundation, a philanthropic organization funded primarily by FTX CEO Sam Bankman-Fried</li>
 <li>“We’re particularly keen to launch massively scalable projects: projects that could grow to productively spend tens or hundreds of millions of dollars per year,” the company said</li>
 </ul>
 
</div>



Cryptocurrency exchange FTX has launched its inaugural philanthropic fund in a bid to inject digital assets cash into charitable pursuits. 



The venture, Future Fund, will distribute at least $100 million — and perhaps as much as $1 billion — this year, “depending on how many outstanding opportunities we find,” the <a href="https://ftxfuturefund.org/announcing-the-future-fund/" target="_blank" rel="noreferrer noopener">company said</a> Monday. 



The fund falls under the umbrella of the FTX Foundation, a philanthropic organization funded primarily by <a href="https://cms.blockworks.co/ftx-valued-at-32-billion/">FTX</a> CEO Sam Bankman-Fried. It also counts major contributions from Alameda Research’s Co-CEO Caroline Ellison, FTX Co-founder and Chief Technology Officer Gary Wang, and FTX’s Head of Engineering Nishad Singh.



“There are billions of people alive today,” Bankman-Fried <a href="https://twitter.com/SBF_FTX/status/1498350635162509320?s=20&amp;t=AT_CBr91g6WG0feYMlMNQw" target="_blank" rel="noreferrer noopener">tweeted</a>. “There are trillions of people who could live great lives if we leave behind a better world to our children.”



The team compiled a list of <a href="https://ftxfuturefund.org/projects/" target="_blank" rel="noreferrer noopener">38 potential projects</a>, including artificial intelligence ethics, pathogen sterilization technology, alternative voting systems, a new university or publishing house and support for movies and documentaries. 



“We’re particularly keen to launch<a href="https://ftxfuturefund.org/massively-scalable-projects/" target="_blank" rel="noreferrer noopener"> massively scalable projects</a>: projects that could grow to productively spend tens or hundreds of millions of dollars per year,” the announcement said.



The move signifies the crypto exchange’s expansion beyond the digital asset world and into other real world industries. To date, FTX has set aside over <a href="https://ftx.com/foundation" target="_blank" rel="noreferrer noopener">$18 million</a> for charity — including $8.7 million of user contributions and $9.5 million from user fees.



The company says its corporate lines and employees have made more than $10 million of charitable donations overall.&nbsp;



Bankman-Fried, a 29-year-old worth $22.5 billion, last year donated $50 million and plans to donate $500 million next year, according to a video <a href="https://twitter.com/nasdaily/status/1486415344604491776?s=20&amp;t=GFZKOCt8tt3YIeGOpNSZDw" target="_blank" rel="noreferrer noopener">interview</a>.



“I wanted to get rich not because I liked money, but because I wanted to give that money to charity,” Bankman-Fried said in the interview.



Last week, the company <a href="https://twitter.com/SBF_FTX/status/1496980981617946624?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1496980981617946624%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fwww.wsj.com%2Flivecoverage%2Frussia-ukraine-latest-news%2Fcard%2Fcrypto-exchange-ftx-gives-cash-to-ukrainians-on-its-platform-0kpNhU6rX8Lusu6PgXxu" target="_blank" rel="noreferrer noopener">gave $25</a> to every Ukrainian registered on its platform after the country’s central bank temporarily suspended its currency market and limited withdrawals.



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