Two of Sam Bankman-Fried’s top associates have secretly pleaded guilty to the collapse of cryptocurrency exchange FTX.
According to a federal prosecutor, they are now collaborating with investigators.
Bankman-Fried, now in FBI custody, has now been extradited and flown from the Bahamas to the United States.
Carolyn Ellison, 28, former CEO of Alameda Research, a trading firm founded by Mr. Bankman-Fried, and Gary Wang, 29, co-founder of FTX, pleaded guilty to charges, including wire transfer fraud, securities. fraud and property fraud.
“Both are cooperating with the Southern District of New York,” US Attorney General Damian Williams said in a video statement posted on social media Wednesday night.
He added that anyone involved in abuse at FTX or Alameda should reach his office because “our patience is not endless” and that more criminal charges against others are possible.
It came as a surprise that he pleaded guilty as Mr Bankman-Fried traveled to the United States on Thursday to answer charges regarding FTX’s failure before appearing before a federal court in New York City on Thursday.
Before Bankman-Fried went on the air, US prosecutors had not publicly disclosed that Ms. Ellison and Mr. Wang were facing potential charges or had agreed to work with investigators.
It is unknown whether Mr Bankman-Fried, who apologized for FTX’s collapse but denied defrauding anyone, was aware of their filings or co-operation.
The two executives signed plea bargains on December 19, in part in return for a promise that prosecutors would offer a reduction in sentences if they cooperate fully with the investigation.
Without such an agreement, the two will face heavy prison sentences. Ms. Ellison, who also faces money laundering conspiracy charges, could be sentenced to up to 110 years in prison and Mr. Wang could be sentenced to up to 50 years in prison.
Both were released on $250,000 bail after appearing in secret court. They are not allowed to leave the continental United States.
Mr. Wang’s lawyer, Ilan Graff, said, “Gary has accepted responsibility for his actions and takes his obligations as a cooperating witness seriously.”
A lawyer for Ms. Ellison did not immediately return messages seeking comment, the Associated Press reported.
For Ms. Ellison and Mr. Wang, the plea bargains are by no means the end of the story.
In a parallel civil complaint filed Wednesday, the Securities and Exchange Commission said they were “active participants” in Mr Bankman-Fried’s plan to defraud FTX investors and defraud their customers.
The SEC said that Mr. Wang created the software code that allowed Alameda to divert FTX client funds, and Ms. Ellison later used the funds that were misused for Alameda’s trading activity.
Mr. Bankman-Fried was arrested by Bahamian authorities last week at the request of the US government. Prosecutors claim he played a central role in FTX’s rapid collapse and hid its problems from the public and investors.
He is accused of illegally siphoning customer deposits on the FTX platform and using them to fund Alameda’s buying and selling real estate and making large campaign donations to left-leaning US politicians.
The founder and former CEO of FTX, which was once worth tens of billions of dollars on paper, is 30 years old and faces the prospect of spending the rest of his life in prison.
Initially denied bail by a Bahamian judge, he was held at Fox Hill prison in the Bahamas, which human rights activists said was inadequately sanitized and infested with rats and insects.
On Wednesday, Bahamian Attorney General Ryan Pinder said Mr. Bankman-Fried had agreed to be transferred to the United States.
He was seen leaving a Magistrates’ Court in Nassau in a dark SUV early Wednesday after waiving his right to appeal extradition.
Mr. Bankman-Fried’s lawyers will be able to seek bail at his first hearing in the US.
The disgraced fintech CEO with an estimated net worth of $32 billion on paper has made FTX the world’s second-largest cryptocurrency exchange.
He said he didn’t “knowingly” misuse customers’ funds, and he believes millions of angry customers will eventually be compensated.
But at a congressional hearing last week, new FTX CEO John Ray III, who was tasked with driving the company into bankruptcy and who had previously oversaw the aftermath of Enron’s collapse, clearly disagreed: “We’re never going to get all these assets back.”
According to the Associated Press