A former top executive at a trading firm closely associated with FTX said she was “really sorry” that she defrauded clients, investors and lenders by pleading guilty to criminal charges over the cryptocurrency exchange’s collapse last month acquaintance.
“I knew it was wrong,” Caroline Ellison, the former executive, told a federal judge in Manhattan Monday as she entered her guilty plea, according to a transcript of the hearing that was unsealed Friday.
Woman. Ellison, 28, has agreed to help federal prosecutors their case against Sam Bankman-Fried, the disgraced founder of FTX and co-founder of Alameda Research, the trading firm that Ms. Ellison had run away from.
Woman. Ellison made confessions that offered a glimpse of how she was a powerful witness against Mr. Bankman Fried. She said she disagreed with the decision by Mr. Bankman-Fried and others to disclose the close relationship between FTX and Alameda and the decision to divert billions of dollars in customer deposits to FTX to repay loans from Alameda.
“I have agreed with others to borrow several billion dollars from FTX to repay these loans,” said Ms. Ellison, said Judge Ronnie Abrams of the US District Court for the Southern District of New York.
What you should know about the FTX collapse
What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It allowed customers to exchange digital currencies for other digital currencies or traditional money; It also had a native cryptocurrency called FTT. The Bahamas-based company built its business on risky trading options that are not legal in the United States.
Woman. Ellison said she wanted to apologize to FTX’s customers and investors and to Alameda’s lenders.
Mr. Bankman-Fried, 30, faces multiple criminal charges stemming from a multi-year scheme that prosecutors say has defrauded customers, investors and lenders. Authorities allege he orchestrated a scheme that embezzled billions of customer deposits to boost trading at Alameda, repay loans, buy lavish properties, lend money to FTX executives and make tens of millions of dollars in campaign donations.
He was extradited Wednesday from the Bahamas, where FTX is based, after being arrested there on Dec. 14. A federal judge in Manhattan approved Mr. Bankman-Fried’s release Thursday after prosecutors and his legal team negotiated a restrictive bail package that mandates that he must be held at his parents’ home in Northern California and must be worn with an electronic surveillance bracelet.
On Wednesday night, when 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 had pleaded guilty to fraud and were cooperating with the government investigation into Mr. Fried.
Mr. Wang also submitted his plea on Monday, a few hours before Ms. Ellison’s court appearance. Mr. Wang told Judge Abrams that he knew what he was “doing was wrong,” according to a transcript of the trial also unsealed Friday.
Late Friday, Judge Abrams said she disclaims 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 is not involved in legal representation, but that she is doing so to “avoid any potential conflict, or the appearance of one.”
The aftermath of FTX’s demise
The sudden collapse of the crypto exchange has left the industry stunned.
Transcripts of Monday’s guilty pleas 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 extradition from the Bahamas .
That same Monday, Mr. Bankman-Fried was is to be extradited and flown back to the United States. But in a court case in the Bahamas, his local lawyer 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 Mrs. Ellison’s pleading shows that Mr. Bankman-Fried was still in the Bahamas.
At the uncertain hearing about when Mr. Bankman-Fried would leave the Bahamas, the government asked Judge Abrams to record Ms. Ellison’s pleadings and delay his public prosecution.
“We expected that he would agree to extradition today,” Danielle Sassoon, an assistant US attorney, told the judge, adding, “There were some issues in the Bahamas courtroom.”