The legal fallout from the collapse of FTX took a new twist on Wednesday night as the Securities and Exchange Commission filed charges against Sam Bankman-Fried’s sometime girlfriend, Caroline Ellison, alleging she manipulated the price of the failed exchange’s FTT token.
Ellison was for years a close lieutenant of Bankman-Fried and served as CEO of his hedge fund, Alameda Research, which is accused of raiding FTX customer funds to paper over its trading losses. She is also the subject of speculation that she is cooperating as a witness with the Justice Department over its investigation into Bankman-Fried’s alleged criminal charges.
According to the SEC, Ellison participated in a scheme to prop up the price of the FTT token—which FTX used as collateral for unsecured loans—on the open market.
“The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda’s FTT holdings to be inflated, which in turn caused the value of collateral on Alameda’s balance sheet to be overstated, and misled investors about FTX’s risk exposure,” said the SEC in a press release about the charges.
The agency also charged FTX’s Chief Technology Officer, Zixiao (Gary) Wang, with improperly diverting customer assets to Alameda.
The SEC does not have the power to impose criminal penalties on individuals, meaning the charges carry no risk of prison time. Instead, the agency is seeking to bar Ellison and Wang from trading securities and is seeking to recover any gains they obtained from the alleged scheme.
Meanwhile, Bankman-Fried—who is facing a litany of criminal charges—was being transferred from prison in the Bahamas to a Brooklyn jail as of Wednesday evening.
The Justice Department has not announced any charges against Ellison. Typically the agency and the SEC announce charges in tandem. The fact the Justice Department has not made an announcement related to Ellison, who was spotted recently at a New York City coffee shop, may support rumors that she is a cooperating witness—though the agency or Ellison have not confirmed this.
This story will be updated with more details shortly.
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