Judge kept FTX execs’ plea deals secret to get its founder to U.S.
NEW YORK — A judge kept secret that two of Sam Bankman-Fried’s closest associates had turned against him so the cryptocurrency entrepreneur wouldn’t get spooked and fight extradition from the Bahamas, according to court transcripts made public Friday.
U.S. prosecutors in New York waited until Mr. Bankman-Fried, the founder of the collapsed crypto exchange FTX, was in FBI custody before revealing that his business partners, Carolyn Ellison and Gary Wang, had secretly pleaded guilty to fraud charges and were cooperating in the investigation, which can earn them leniency at sentencing.
U.S. Attorney Damian Williams announced the guilty pleas when Mr. BankmanFried was in the air late Wednesday.
Prosecutors had been concerned that if Mr. BankmanFried found out his friends were cooperating, he might try to fight extradition from the Bahamas, where he had been arrested at the request of U.S. authorities.
Ellison, 28, and Wang, 29, entered their guilty pleas in Manhattan federal court Monday to charges that carry a potential penalty of decades in prison.
At that hearing, Assistant U.S. Attorney Danielle Sassoon told the judge prosecutors had expected Mr. Bankman-Fried to consent to extradition Monday before there were “some hiccups in the Bahamian courtroom.”
“We’re still expecting extradition soon, but given that he has not yet entered his consent, we think it could potentially thwart our law enforcement objectives to extradite him if Ms. Ellison’s cooperation were disclosed at this time,” Ms. Sassoon told U.S. District Judge Ronnie Abrams.
The judge got assurance from Ellison’s lawyer that there was no objection to the request before granting it.
“Exposure of cooperation could hinder law enforcement officials’ ability to continue theongoing investigation and, in addition, may affect Mr. Bankman-Fried’s decision to waive extradition in this case,” Judge Abrams said.
Mr. Bankman-Fried, 30, appeared in court in New York on Thursday. He was released on the condition that he live under house arrest with his parents in Palo Alto, Calif., while awaiting trial.
The home where he was staying was protected Friday by heightened security, including a Stanford University security guard posted about 50 yards from the home to keep passersby away. The school’s president lives nearby.
Ellison is the former chief executive of Mr. BankmanFried’s cryptocurrency hedge fund trading firm, Alameda Research. Wang cofounded FTX, the crypto exchange.
They and Mr. BankmanFried are accused of defrauding customers and investors by illegally diverting massive sums of customer money from FTX to make lavish real estate purchases, donate money to politicians and make risky trades at Alameda.
In court Monday, Ellison said since FTX and Alameda collapsed in November, she has “worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation.”
“I am truly sorry for what I did. I knew that it was wrong. And I want to apologize for my actions to the affected customers of FTX, lenders to Alameda and investors in FTX,” she said, according to a transcript.
During his plea earlier Monday, Wang said that he made changes to computer code to enable the transactions with Alameda.
“I knew what I was doing was wrong,” he said.