US prosecutors are reportedly drafting a possible fraud indictment against disgraced crypto mogul Sam Bankman-Fried – and speculation is mounting that his ex-girlfriend Caroline Ellison could be a snitch in the case.
According to Bloomberg News, Justice Department officials in the Southern District of New York are reportedly investigating the alleged transfer of hundreds of millions of dollars from the US to the Bahamas right around the time its FTX cryptocurrency exchange filed for Chapter 11 bankruptcy protection.
Federal prosecutors in Manhattan are also investigating whether Bankman-Fried manipulated the crypto markets by orchestrating trades that earlier reports led to the collapse of the cryptocurrency TerraUSD earlier this year.
Meanwhile, Ellison, the ex-CEO of FTX’s sister hedge fund Alameda Research, He was reportedly spotted drinking coffee at a Soho eatery in Manhattan last week — and hired Stephanie Avakian, a partner at white-shoe law firm Wilmer Hale, the former head of enforcement at the Securities and Exchange Commission, Bloomberg reported separately.
The Post has reached out to Wilmer Hale for comment.
While Bankman-Fried has given several interviews and posted frequently on social media in recent weeks, Ellison has remained silent – leading some observers to believe she is seeking a cooperation with authorities.
Last month, Bankman-Fried published a wild, wide-ranging interview in which he appeared to put the blame for FTX’s collapse on Ellison — a 28-year-old self-confessed “Harry Potter” enthusiast who has tweeted about taking amphetamines. Bankman-Fried, in an interview with Vox reporter Kelsey Piper, insisted that his claim that FTX “didn’t invest any client assets” was “factually accurate” because Alameda Research, not FTX, actually made the investments.
Bankman-Fried and Ellison were reportedly part of a group of 10 housemates who controlled operations at FTX and Alameda from a penthouse in the Bahamas. The group was said to be romantically involved, with some online speculation that they were a “polycule,” or network of polyamorous relationships.
FTX is said to have used billions of dollars in client funds to cover Alameda Research debts, sparking a chain of events that led to its sudden implosion last month. On Nov. 11, several crypto watchers noted that about $663 million was suspiciously moved from FTX-controlled digital wallets to a fund managed by Bahamian authorities.
The Securities Commission of the Bahamas released a statement Nov. 17 saying it had ordered funds transferred to its own digital wallet “for safekeeping.”
Investigators are also looking into whether FTX engaged in criminal behavior by using client funds to cover debts held by Alameda Research, the sister analytics firm also founded by Bankman-Fried, Bloomberg News reported.
Bankman-Fried attorney Mark Cohen and Bankman-Fried spokesman Mark Botnick declined to comment.
In recent media interviews, Bankman-Fried denied knowingly committing fraud.
Bankman-Fried said he accepts responsibility for FTX’s collapse and failed to grasp the extent of the risk that Bahamas-based FTX and Alameda took on both companies.
One of the allegations against Bankman-Fried is that he caused Alameda to use customer funds in FTX to place bets on the market. Bankman-Fried has said in public interviews that he did not “knowingly” mix client assets with Alameda.
“I didn’t know exactly what was going on,” Bankman-Fried told the New York Times at last month’s DealBook Summit.
“I learned a lot of those things as they went along.”
Last week, Bankman-Fried tweeted that he was prepared to testify before Congress Tuesday, but that he would be qualified in what he said and that he “won’t be as helpful” as he would like.
The tweet came in response to multiple tweets earlier this month from House Financial Services Committee Chairwoman Maxine Waters (D-Calif.) who had asked that Bankman-Fried attend Tuesday’s FTX collapse hearings.
Waters said in a Series of tweets to Bankman-Fried that based on several media interviews since the collapse of FTX, “it was clear to us that the information you have so far is sufficient for a statement”.
FTX failed in a cryptocurrency version of a bank run last month when clients tried to withdraw their assets at once over doubts about the financial strength of the company and Alameda Research.
Since its collapse, FTX’s new management has described the cryptocurrency exchange’s management as a “complete failure of corporate controls.”
In a series of tweets to Waters, Bankman-Fried listed specific issues he might discuss with the committee, including the solvency of FTX’s US operations, its American clients, and potential solutions for returning assets to international clients.
He also said he could speak up about what he thinks led to the crash and “my own mistakes.”
In a TV interview just over 10 days ago, Bankman-Fried said he broadly believes FTX’s US subsidiary is fully solvent and can begin processing withdrawals immediately.
Referring to the rest of FTX, which was significantly larger than the US division, he said the fate of client funds is largely out of his control.
Bankman-Fried, who was once one of the richest people on paper, now says he gets by with a single credit card and likely has less than $100,000 in his account following FTX’s failure.
With mail wires