Caroline Ellison says she's 'truly sorry' for her role in the FTX meltdown

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A former executive at a trading company closely linked to FTX said she was “really sorry” for defrauding clients, investors and creditors by pleading guilty to criminal charges stemming from the cryptocurrency exchange collapse last month.

“I knew I was wrong,” Caroline Ellison, the former executive, told a federal judge in Manhattan on Monday as she filed her guilty plea, according to a transcript of the hearing that was revealed on Friday.

Ellison, 28, agreed to help federal prosecutors build their case against Sam Bankman-Fried, the disgraced founder of FTX and co-founder of Alameda Research, the trading company Ellison ran.

Mrs. Ellison made confessions that offered a glimpse of how she could be a powerful witness against Mr. Bankman-Fried. She said she agreed with Mr. Bankman-Fried and others for not disclosing the close relationship between FTX and Alameda, and the decision to divert billions in customer deposits to FTX to pay off Alameda loans.

“I have agreed with others to borrow several billion dollars from FTX to pay off these loans,” said Ms. Ellison to Judge Ronnie Abrams of the U.S. District Court for the Southern District of New York.

Mrs. Ellison said she wanted to apologize to FTX customers and investors and to Alameda’s creditors.

Mr. Bankman-Fried, 30, is facing multiple criminal charges stemming from what prosecutors said was a multi-year scheme that defrauded customers, investors and creditors. Authorities claim he orchestrated a scheme that embezzled billions in client deposits to supply businesses in Alameda, pay off loans, buy luxury real estate, lend money to FTX executives and make tens of millions in campaign contributions.

He was extradited from the Bahamas, where FTX is headquartered, on Wednesday following his December 12 arrest. A federal judge in Manhattan approved Bankman-Fried’s release on Thursday after prosecutors and his legal team negotiated a restrictive bail package that requires him to be confined to his parents’ northern California home and wear a bracelet. electronic monitoring.

On Wednesday night, while Mr. Bankman-Fried was flying to the United States, Damian Williams, the Attorney for the Southern District of New York, announced that Ms. Ellison and another former FTX executive, Zixiao Wang, known as Gary Wang, both pleaded guilty to fraud charges and were cooperating with the government’s investigation into Mr. Bankman-Fried.

Wang also filed his claim on Monday, several hours before Ellison’s appearance in court. Wang told Judge Abrams that he knew what he “was doing was wrong,” according to a transcript of the lawsuit, which was also opened on Friday.

On Friday night, Judge Abrams said she was declining any further involvement in the case because Davis Polk & Wardwell, the law firm where her husband is a partner, had worked for FTX in 2021. She said her husband was not involved in the legal representation, but she did so to “avoid any possible conflict or the appearance of one”.

Transcripts of Monday’s guilty pleas also show that prosecutors were concerned about what might happen if Bankman-Fried learned that his two former executives were pleading guilty and cooperating with the government before he consented to be extradited from Bahamas.

That same Monday, it was expected that Mr. Bankman-Fried be extradited and taken back to the United States. But in a court case in the Bahamas, his lawyer said his client was not yet ready to waive extradition.

Mr. Bankman-Fried was then returned to Fox Hill Prison in the Bahamas where he was being held.

The transcript of Mrs. Ellison shows that when his hearing began at 4:30 p.m., Mr. Bankman-Fried was still in the Bahamas.

At the hearing, with uncertainty about when Mr. Bankman-Fried would leave the Bahamas, the government asked Judge Abrams to temporarily seal the transcript of Ms. Ellison and delay its public registration.

“We expected him to consent to extradition today,” Danielle Sassoon, Assistant U.S. Attorney, told the judge, adding, “There were some hiccups in the Bahamian court.”