FTX co-founder Gary Wang, convicted of misusing funds at a fictitious crypto exchange, may face punishment after his case goes to trial.

On Nov. 13, prosecutors in the U.S. District Court for the Southern District of New York filed a brief alleging that Wang provided significant assistance in the investigation of crimes related to FTX, as well as in the prosecution of Sam Bankman-Fried and several other cases.

The government’s attorneys noted the importance of Wang’s testimony at the trial of Bankman-Fried, who was sentenced to 25 years. They also suggested that if Judge Lewis Kaplan decides to sentence Wang, he could develop a tool to identify potential illegal activities in the crypto market. Prosecutors noted that Wang’s testimony was truthful and corroborated by other evidence.

“Wang has also provided substantial assistance – and in the process taken steps to right past wrongs – by putting his extraordinary computer programing skills to use in detecting potential fraud in the stock and cryptocurrency markets.”

Court filing

Wang, who pleaded guilty to wire fraud, commodities fraud, and securities fraud in December 2022, is awaiting final sentencing on Nov. 20.

Is the FTX story nearing its end?

The latest updates would make Wang the fifth and final FTX or Alameda Research executive to face sentencing. Bankman-Fried was the only one to plead not guilty. In contrast, former Alameda CEO Caroline Ellison and FTX Digital Markets co-CEO Ryan Salame pleaded guilty. All of them are currently serving federal prison sentences.

However, the Bankman-Fried case has continued to see new details and court cases emerge, even as the founder of one of the world’s once-largest exchanges is serving his time in prison.

Meanwhile, Bankman-Fried’s assets are under threat

Earlier, U.S. prosecutors filed a lawsuit seeking to seize cryptocurrency, which they say Bankman-Fried used to bribe Chinese officials.

The lawsuit, filed on Nov. 12 in New York District Court, alleges that a Binance account, then worth about $8.6 million but later growing to about $18.5 million, was used to launder money related to bribes before FTX collapsed in late 2022.

Prosecutors noted that in 2021, Chinese authorities froze two Alameda Research accounts on Chinese exchanges that held $1 billion in cryptocurrency. Later, on Nov. 16, 2021, Bankman-Fried was recorded transferring $40 million to a personal wallet, after which the Alameda accounts were unfrozen. Prosecutors allege that Bankman-Fried initiated additional transactions worth tens of millions of dollars in cryptocurrency to complete the bribe.

“As a result of the Investigation, the Government learned that on or about November 16, 2021, at Bankman-Fried’s direction, approximately 40 million USDT (the “Bribe Payment”) was transferred from an Alameda cryptocurrency wallet hosted by FTX.”

Court filing

The account contained five linked deposit accounts, obscuring the origin of the bribe funds. They described a “flood” of deposits and withdrawals from the account and regular transfers of Bitcoin (BTC) and stablecoins to five wallets. Ellison testified that the total amount of bribes was about $150 million.

Bankman-Fried was initially charged with additional charges related to financial fraud and bribery of foreign officials, which were later dropped. On Sept. 13, his defense team filed an appeal, arguing that Bankman-Fried’s trial was unfair.

Meanwhile, the new FTX management is bombarded with lawsuits

FTX’s new management, meanwhile, is once again preparing lawsuits and demanding money. This time from Binance.

FTX bankruptcy trustees have filed a lawsuit against Binance and its former CEO, Changpeng Zhao, demanding a return of about $1.8 billion. The plaintiffs claim that Binance obtained the funds in a fraudulent transaction in 2021.

According to court documents, FTX and its trading subsidiary Alameda Research were probably insolvent from the start and were certainly insolvent on their balance sheets by early 2021. Therefore, the plaintiffs allege that the share buyback deal was fraudulent.

The lawsuit is one of many filed by FTX and Alameda against their former investors, affiliates, and customers as part of the bankruptcy case. On Nov. 9, the companies filed 23 lawsuits. Among them are claims against U.S. exchange Crypto.com and the political group FWD.US founded by Mark Zuckerberg.

FTX has also filed claims against Anthony Scaramucci and his hedge fund, SkyBridge Capital. The exchange’s lawyers claim that in 2022, Bankman-Fried invested $67 million in various SkyBridge projects since Scaramucci was “seeking financial assistance.” However, these investments “brought virtually no benefit,” the plaintiffs say. According to court documents, FTX is now trying to recover more than $100 million in damages from the company.

Alameda has also filed a lawsuit against Sasha Ivanov, the founder of the Waves blockchain. The company intends to return the $90 million invested in Vires Finance. This liquidity platform then operated on Waves.

“To divert attention from his involvement in the fraud, Ivanov attempted to publicly blame Alameda for destabilizing the Waves ecosystem, tweeting that Alameda had manipulated the WAVES price and organized FUD (“Fear, Uncertainty, and Doubt”) campaigns to trigger panic selling.”

Alameda lawsuit

And what’s next?

In general, the history of the FTX and exchange executives are two different stories. While the platform executives serve their sentences, FTX creditors are frantically trying to return the money they wasted.

The debt to creditors is about $11.2 billion, and the funds available to cover the debt is $14.6-16.3 billion.

Thus, there is very little time left before the end of the scandalous exchange story – to decide on punishment for Wang and repay everyone’s debts.

Former Alameda co-CEO Sam Trabucco will forfeit real estate and luxury assets to the FTX, according to a proposed settlement filed in court.

Documents disclosed on Nov. 11 revealed that the elusive Trabucco was poised to forgo two San Francisco apartments worth $8.7 million, a super yacht valued at $2.5 million, and disputed customer claims of $70 million to the defunct crypto group. 

Court filings regarding the proposed agreement between the FTX estate and Alameda’ Trabucco noted that the executive received $40 million in “potentially avoidable transfers” as part of Sam Bankman-Fried’s crypto empire within two years.

Trabucco was one of Bankman-Fried’s closest comrades in his blockchain enterprise. As co-CEO of Alameda, he led SBF’s hedge fund alongside Caroline Ellison and was part of FTX’s top execs.

Alameda’s joint boss mysteriously left the company in August 2022, months before Bankman-Fried’s firms filed for bankruptcy in November.

SBF was arrested and tried in a Manhattan court. Alameda/FTX tops shots like Ellison, Gary Wang, and Nishad Singh signed plea deals with federal prosecutors in exchange for judicial leniency.

Bankman-Fried was sentenced to 25 years in prison, while Ellison received a two-year supervised release term for her role in America’s largest crypto fraud. Wang and Singh appealed for no jail time as the pair await sentencing.

Trabucco never reportedly signed a plea agreement or appeared to testify in court despite being employed at Alameda during a period of asset commingling and illegal practices. The one-time Alameda CEO has ducked the media spotlight throughout FTX’s saga, and now seemed bound for an unknown future post-SBF.

The FTX estate prepared to disburse about $16 billion to creditors following concluded court cases. FTX lawyers continued to pursue asset recovery, launching lawsuits against Binance founder Changpeng Zhao and centralized exchange Crypto.com.

FTX, FTX Digital Markets and former Alameda Research co-CEO Sam Trabucco have reached a settlement agreement in the United States Bankruptcy Court for the District of Delaware. Trabucco has maintained a low profile since leaving FTX just months before its collapse.

Agreeing to save time and money

In a motion that will be heard on Dec. 12, the parties agreed that Trabucco will transfer the titles to two apartments in San Francisco worth $8.7 million and his 53-foot yacht worth $2.5 million to FTX Debtors. In addition, he will drop claims against FTX worth $70 million and FTX will release him from any claims it had as well.

These decisions come after “constructive, arm’s length negotiations.” If forced into litigation, Trabucco would have defenses and claims that would lead to lengthy and costly proceedings. The motion states:

“The proposed settlement likely would generate more value to the Debtors’ estates on a risk-adjusted basis than the Debtors could recover if they were to initiate an adversary proceeding against Trabucco and obtain a favorable judgment against him.”

Objections to the proposed settlement can be filed through Nov. 26.

Related: 15 crypto leaders make the cut for Forbes 30 Under 30

A well-timed departure

Trabucco resigned from his position at Alameda Research in August 2022. He was hired as a trader and assumed the co-CEO role in August 2021.

“Alameda is an awesome place — the problems we solve here remain the most interesting I am aware of, and the team remains the most impressive I’ve ever known,” he wrote in a tweet announcing his departure.

FTX collapsed three months after Trabucco’s departure. He was not heard from during the criminal proceedings against the FTX upper management, and United States authorities did not file charges against him. There was speculation about Trabucco’s knowledge of or participation in the wrongdoing at FTX.

Trabucco wrote a letter to the court asking for leniency in the sentencing of former FTX Digital Markets co-CEO Ryan Salame in May.

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