The Securities and Exchange Commission (SEC) has charged Caroline Ellison, the former CEO of Alameda Research, and Zixiao Wang, the former Chief Technology Officer of FTX Trading, for their involvement in a scheme to defraud equity investors in FTX, a crypto trading platform co-founded by Samuel Bankman-Fried and Wang.
The SEC's complaint alleges that between 2019 and 2022, Ellison manipulated the price of FTT, an exchange crypto security token issued by FTX, by purchasing large quantities on the open market to boost its price. FTT served as collateral for undisclosed loans by FTX of its customers' assets to Alameda, a crypto hedge fund owned by Bankman-Fried and Wang and run by Ellison.
The complaint also alleges that Bankman-Fried raised billions of dollars from investors by falsely claiming that FTX was a safe crypto asset trading platform with sophisticated risk mitigation measures, and that Alameda was just another customer with no special privileges, while at the same time improperly diverting FTX customer assets to Alameda.
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, and seeks injunctions against future securities law violations, an injunction prohibiting them from participating in any offering of a penny stock, and civil penalties.