The U.S. Securities and Exchange Commission (SEC) has successfully negotiated consent judgments against three notable former executives of FTX and Alameda Research. This agreement, pending court approval, involves Caroline Ellison, ex-CEO of Alameda, along with Gary Wang and Nishad Singh, both past executives at FTX.
As part of the settlements, the executives will face permanent antifraud injunctions. Ellison is subjected to a ten-year ban from serving as an officer or director of any public company, while Wang and Singh both agreed to eight-year restrictions on such positions. These measures are intended to curb future misconduct in the financial sector.
The SEC”s actions arise from allegations that these executives misappropriated over $1.8 billion in customer funds by providing Alameda with unlimited credit, which was funded by customer deposits, rather than their own capital. The SEC”s complaints emphasize that the executives misled investors about FTX”s risk management systems designed to protect customer assets.
Documents submitted to the U.S. District Court for the Southern District of New York detail that the settlements include conduct-based restrictions. Each executive consented to these terms without admitting or denying the SEC”s allegations. The agreements specifically address violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as Section 17(a) of the Securities Act of 1933.
The SEC”s complaints indicate that the executives engaged in a scheme that enabled the diversion of customer funds to support various ventures and loans, including loans to themselves. This behavior reportedly continued until the eventual collapse of FTX in November 2022, which has led to ongoing investigations and legal actions involving multiple regulatory bodies.
The SEC”s Cyber and Emerging Technologies Unit spearheaded the investigation, with litigation efforts conducted by Amy Burkart and her team. The culmination of their work is reflected in these proposed consent judgments, which await final approval from the federal district court in New York.
These developments follow a trend of increasing regulatory scrutiny within the cryptocurrency industry, especially concerning allegations of investor fraud and the misappropriation of assets.
