Caroline Ellison manipulated the FTT price on orders from Sam Bankman-Fried

Under the direction of FTX founder Sam Bankman-Fried, Caroline Ellison engaged in ‘automated buying’ of the utility token FTT on various platforms to inflate the asset’s price. This is stated in иске SEC against the former head of Alameda Research and co-founder of the exchange Gary Wang.

According to the document, Bankman-Fried also ordered Ellison to borrow ‘billions of dollars’ from external lenders secured by FTT, which was provided to the trading company free of charge. The regulator described the token as an ‘illiquid cryptographic security‘.

The SEC noted that FTT price manipulations helped lift the value of Alameda Research’s assets. This, in turn, gave the company the opportunity to ‘borrow even more money with greater risk for FTX’s customers and investors’.

The suit states that, amid the May 2022 crypto market rout, lenders to the trading company demanded repayment, but Alameda Research could not meet the obligations.

‘Bankman-Fried, with the knowledge of the defendants, directed transfers of additional billions of dollars of customer FTX assets to Alameda’s accounts to preserve the lending relationships, so that money would continue to flow from creditors and other investors. Ellison then used customer funds to pay the company’s debts’,

Despite the complexities, the SEC disclosed that before FTX Group filed for bankruptcy, Wang and Bankman-Fried were the sole owners of Alameda Research. Moreover, Bankman-Fried owned 90% of the trading company.

The regulator also repeated the thesis of the new CEO John Ray regarding the claim that the founder of FTX ordered the engineering team, including Wang, to remove Alameda Research from the platform’s ‘auto-liquidation’ system.

‘The collateral could have fallen below the required margin level, however automatic liquidation did not occur. Alameda was the sole client of FTX exempt from this procedure’,

Meanwhile, Bankman-Fried stressed that the Ellison-run company did not receive preferential treatment from FTX. As evidence, regulators cited his statements to The Wall Street Journal and Bloomberg. Moreover, the founder allegedly instructed other employees in related entities to adopt similar rhetoric.

The SEC concluded that Alameda’s exclusion from the auto-liquidation system did not end its privileges. At times, assets belonging to FTX customers valued at more than $8 billion were under the company’s control.

Internal exchange systems automatically accrued interest on these liabilities. To prevent Alameda from paying them, Bankman-Fried allegedly directed transfers to a special account that enabled such a facility.

When the FTX business began to crumble, and users withdrew about $5 billion in a single day, the founder began seeking emergency financing. The SEC says that, in documents for potential investors, the aforementioned $8 billion were described as a ‘secret and internally designated account’.

On December 22, Ellison and Wang pleaded guilty to charges by the US Department of Justice related to the collapse of Bankman-Fried’s business empire, and agreed to cooperate with investigators.

According to the plea agreement, Ellison will hand over to authorities all proceeds obtained as a result of the crimes. In exchange for cooperating with state authorities, she will not be prosecuted in the ongoing criminal case.

#XRPCommunity #SBF_FTX Below is the Plea and Cooperation Agreement in U.S. v. Caroline Ellison.https://t.co/k0kFUtyk13

— James K. Filan 🇺🇸🇮🇪 126k (beware of imposters) (@FilanLaw) December 22, 2022

The deal does not include ‘criminal tax offenses related to her involvement in a scheme to defraud and deceive customers of FTX and Alameda from November 2009 to November 2022’.

The agreement also does not shield Ellison from investigations into crimes that have been classified as securities and commodities fraud, as well as conspiracy to commit money laundering.

As noted by Jefferies Financial Group, FTX creditors will recover no more than 40% of the funds.

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