A judge has kept it a secret that two of Sam Bankman-Fried’s closest associates turned against him so the crypto businessman wouldn’t panic and fight extradition from the Bahamas, according to court records obtained by the court. announced on Friday.
US prosecutors in New York waited until Bankman-Fried, the founder of the collapsed crypto exchange FTX, was detained by the FBI before revealing that his business partners, Carolyn Ellison and Gary Wang, have secretly pleaded guilty to fraud and are cooperating in the investigation. , which may grant them leniency in sentencing.
US Attorney Damian Williams plead guilty when Bankman-Fried airs late on Wednesday.
Prosecutors were concerned that if Bankman-Fried found out his friends were cooperating, he could try to fight extradition from the Bahamas, where he was arrested at the request of US authorities. Ky.
Ellison, 28, and Wang, 29, pleaded guilty in Manhattan federal court on Monday to charges that could lead to decades in prison.
At that hearing, Assistant U.S. Attorney Danielle Sassoon told the judge that prosecutors had expected Bankman-Fried to agree to extradition Monday before “some glitches in the Bahamian courtroom.”
“We are still expecting an extradition soon, but since he has yet to agree, we think it is likely to get in the way of our law enforcement goals to extradite him. Ellison’s cooperation is disclosed at this time,” Sassoon told U.S. District Judge Ronnie Abrams.
The judge received assurances from Ellison’s attorney that there were no objections to the request before accepting it.
“Showing cooperation may impede the ability of law enforcement officials to continue an ongoing investigation and may, in addition, affect Mr Bankman-Fried’s decision to drop the extradition of Mr. this case,” Abrams said.
Bankman-Fried, 30, appeared in court in New York on Thursday. He was released on condition that he lives under house arrest with his parents in PaloAlto, californiawhile awaiting trial.
The home where he was staying was under increased security on Friday, including a Stanford University security guard stationed about 50 yards (46 meters) from the house to prevent people from entering. The principal of the school lives nearby.
Ellison is a former CEO of crypto hedge fund trading firm Bankman-Fried, Alameda Research. Wang co-founded FTX, a cryptocurrency exchange. Both agreed to testify at the Bankman-Fried trial.
Surname and Bankman-Fried are accused of defrauding customers and investors by illegally transferring huge amounts of clients’ money from FTX to buy lavish real estate, donate money to politicians and make risky transactions in Alameda.
In court on Monday, Ellison said since FTX and Alameda fall in novembershe has “worked hard to assist in asset recovery for the benefit of her clients and cooperated with the government investigation.”
“I am really sorry for what I did. I know that is wrong. And I would like to apologize for my actions towards affected FTX customers, Alameda lenders, and FTX investors,” she said, according to a transcript.
Ellison said she was aware between 2019 and 2022 that Alameda had been granted access to the lending facility at FTX.com, which allowed Alameda to maintain a negative balance in a variety of currencies.
The practical effect of the agreement, she said, was that Alameda had access to an unlimited line of credit with no collateral required and no interest on negative balances or being subject to a margin call or liquidation protocol.
Ellison said she knows that if Alameda’s FTX accounts have a significantly negative balance in any currency, it means Alameda is borrowing money that FTX customers have deposited with the exchange.
“When I was co-CEO and then CEO, I understood that Alameda made many large illiquid ventures and gave Mr. Bankman-Fried and other executives from FTX to borrow money,” she said.
Ellison said she understands that Alameda has financed investments with short-term and long-term loans worth several billion dollars from outside lenders in the crypto industry.
When many of those loans were revoked by lenders in June, she agreed with others to borrow several billion dollars from FTX to repay them.
“I understand that FTX will need to use customer funds to finance its loans to Alameda,” she said. “I also understand that many FTX customers have invested in crypto derivatives and most FTX customers do not expect that FTX will lend to Alameda their digital assets and… their deposits. this way.”
From July to October, Ellison said, she agreed with Bankman-Fried and others to provide false financial statements to Alameda’s lenders, including concealed quarterly balance sheets. the company’s level of borrowing and the billions of dollars in loans it made to FTX executives. and others.
“I have 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 agreement,” Ellison said.
In his defense early Monday, Wang said he changed the computer code to enable transactions with Alameda.
“I know what I did was wrong,” he said.
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