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"As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards," said SEC Chair Gary Gensler. "We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag. Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance."
"As alleged, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit," said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement. "By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced."
The SEC’s complaint charges Ellison and Wang with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint seeks injunctions against future securities law violations; an injunction that prohibits Ellison and Wang from participating in the issuance, purchase, offer, or sale of any securities, except for their own personal accounts; disgorgement of their ill-gotten gains; a civil penalty; and an officer and director bar. Ellison and Wang have consented to bifurcated settlements, which are subject to court approval, under which they will be permanently enjoined from violating the federal securities laws, the above-described conduct-based injunctions, and officer and director bars. Upon motion of the SEC, the court will determine whether and what amount of disgorgement of ill-gotten gains plus prejudgment interest and/or a civil penalty is appropriate, as well as the length of the officer and director bar and the conduct-based injunction imposed against Wang.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced charges against Ellison and Wang.
Ellison and Wang are cooperating with the SEC’s ongoing investigation, which is being conducted by Devlin N. Su, Ivan Snyder, and David S. Brown of the Crypto Assets and Cyber Unit and Brian Huchro and Pasha Salimi. It is being supervised by Amy Flaherty Hartman, Michael Brennan, Jorge Tenreiro, and David Hirsch. The SEC’s litigation will be led by Amy Burkart and David D’Addio and supervised by Ladan Stewart and Olivia Choe. Additional assistance to the investigation was provided by Therese Scheuer, Alistaire Bambach, Ainsley Kerr, William Connolly, and Howard Kaplan.
The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the Commodity Futures Trading Commission.