Business associates hit on Sam Bankman-Fried

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The stunning collapse of one of the most well-known crypto firms has quickly turned into a legal battle pitting former executives against former romantic partners.

Last week, when FTX founder Sam Bankman-Fried was extradited from the Bahamas to the United States, two of his former business partners pled guilty to multiple fraud and conspiracy charges.

Caroline Ellison, the 28-year-old former CEO of crypto hedge fund Alameda, has apologized to a federal judge in New York, saying that she and her former employees knowingly stole and attempted billions of dollars from clients of Bankman-Fried’s FTX exchange cover up according to court records.

“I’m really sorry for what I did,” Ellison told the court. “I knew it was wrong.”

Ellison told the court that Alameda had virtually unlimited borrowing in FTX and that she knew the exchange would have to use customer funds to fund loans to the hedge funds. She also agreed to keep the two companies’ unusually close relationship a secret from investors and clients.

From July through October, she told the court, Ellison agreed with Bankman-Fried and others “to provide materially misleading financial statements to Alameda’s lenders” and prepared financial statements that obscured the extent of Alameda’s borrowing.

Ellison was charged with seven felonies, including conspiracy to wire fraud and money laundering. She and Bankman-Fried were close business partners who dated briefly.

Another employee, Gary Wang, former FTX chief technology officer, pleaded guilty to four counts of similar charges.

Wang told the court that part of his role at FTX was to make changes to the exchange’s code that would grant Alameda “special privileges” on FTX.

“I knew what I was doing was wrong,” he said.

Both Ellison and Wang are working with federal prosecutors, making them potentially damning witnesses against Bankman-Fried, who has repeatedly denied intentionally defrauding clients and investors.

Bankman-Fried, 30, appeared in a US courtroom in New York on Thursday, where a federal judge released him on $250 million bail. He has to surrender his passport and remains under house arrest at his parents’ home in Palo Alto, California.

Although $250 million is an extraordinary sum, Bankman-Fried does not have to pay it unless he violates the terms of his bail agreement or fails to appear in court. The atypical bail plan was agreed as part of his commitment to forego his extradition fight.

After his court appearance, Bankman-Fried sighted in a business class lounge at John F. Kennedy International Airport in New York. Crypto reporter Tiffany Fong also tweeted a photo showing Bankman-Fried on an American Airlines flight.

Bankman-Fried’s legal team confirmed to CNN Business that he has arrived in Palo Alto and is at home with his parents. His attorney declined to comment on Ellison and Wang’s guilty pleas.

The federal judge said Thursday Bankman-Fried will face eight felonies, including fraud and conspiracy, at an unspecified future date.

Prosecutors allege that Bankman-Fried orchestrated “one of the largest financial frauds in American history” and stole billions of dollars from FTX customers to cover losses at Alameda and enrich himself. If convicted, he faces a life sentence.

Before his arrest in the Bahamas earlier this month, Bankman-Fried had tried to portray himself as a hapless entrepreneur who got beyond his skis. He repeatedly apologized to customers and FTX employees, he said “Fed up,” while denying that he knowingly cheated on anyone.

– CNN’s Lauren del Valle and Kara Scannell contributed coverage.

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