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FTX Scandal Nets Bankman-Fried’s Two Closest Allies, Who Plead Guilty to Fraud as Part of a Likely Plea Deal

Before November 2022, Sam Bankman-Fried and the cryptocurrency exchange FTX were not well known by the average person. This situation changed in November after CoinDesk released a damning report about Sam Bankman-Fried's crypto-trading company, Alameda Research. The CoinDesk report revealed what was believed to be a Ponzi scheme operating in the fast lane. Alameda Research had banked on the native FTX FTT token to make up the bulk of its balance sheet. In essence, it used its own “tokens” as collateral against itself.

In the wake of the CoinDesk revelation in early November, major crypto-trading company Binance announced it was going to eliminate its FTT holdings. This announcement, in conjunction with the apparent internal manipulation of the tokens, caused anxiety among FTT investors and an avalanche of disinvestment. It soon became apparent that the investors’ “money” wasn't there and had disappeared like a puff of smoke. Unsurprisingly, FXT could not meet withdrawal demands. FXT dropped from $50 to $1 in value. Bankman-Fried went from being a billionaire to claiming that he had only $100,000 left.

Bankman-Fried was a cult figure for many crypto enthusiasts, a financial “genius.” Also, he was a popular golden goose among Democrats. He was close behind George Soros in funding Democratic politicians. However, the dominos fell at the beginning of November. In the second half of November, FTX was a ghost of its former self. The same was true of Bankman-Fried. Meanwhile, Bankman-Fried was in the Bahamas, complaining about his plight.

Congresswoman Maxine Waters (D-CA) on behalf of the U.S. House Committee on Financial Services was surprisingly gentle on him in her tweet of December 2: “@SBF_FTX, we appreciate that you've been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company's customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th.”

In response to Maxine Waters, he tweeted his pledge to testify: “Rep. Waters, and the House Committee on Financial Services: Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I'm not sure that will happen by the 13th. But when it does, I will testify.”

Remembering back to the 13th of November, he had been tweeting absurd puffery, promising that he would “fix” everything. At the end of November, FTX had collapsed in on itself like a dying star.

Then, bankruptcy.

“We have witnessed one of the most abrupt and difficult collapses in the history of corporate America,” said James Bromley, an attorney representing the company.

After Bankman-Fried was arrested in the Bahamas, he was famously critical of his new lodgings. What was the location of Caroline Ellison, the CEO of Alameda Research and Bankman-Fried's ex-girlfriend? And where was Gary Wang, the co-founder of FTX?

Some time ago, Ellison was seen at a location in New York, reportedly meeting with lawyers. After the “sighting,” she disappeared. Also missing was Gary Wang, FTX’s co-founder.

A few days ago, the International Business Times speculated that Ellison was taking action fast to avoid years in federal prison by negotiating an agreement with prosecutors.

It's now clear that Ellison and Wang have done just that. Both of them pleaded guilty to fraud on Wednesday. The two former executives and friends of Bankman-Fried pleaded guilty to one count of fraud in the Southern District courtroom. There is no doubt that Wang (29) and Ellison (28) have seen the evidence on the wall, and it is certain that their lawyers have advised them that the plea deal and cooperation were the only options to avoid spending their thirties in federal prison. The specifics of the plea deal have not been made public, but the sentence is likely to be contingent upon their level of cooperation as well as their agreement to testify against Bankman-Fried.

According to the Daily Mail: “‘If you were participating in misconduct, now is the time to get ahead of it,’ [US Attorney Damien] Williams said, warning other prospective fraudsters to come forward or face more intense charges later.”

There are likely many more “little fish” to catch, but Bankman-Fried is not likely going to be able to negotiate a plea bargain. He's likely to spend the rest of the next two decades in federal prison.

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