In a landmark enforcement action, the U.S. Securities and Exchange Commission (SEC) is moving to bar key former executives of the collapsed FTX exchange and its affiliated trading firm, Alameda Research, from holding corporate leadership positions. The regulator has proposed final consent judgments in the Southern District of New York against former Alameda Research CEO Caroline Ellison, former FTX co-founder and Chief Technology Officer Gary Wang, and former FTX co-lead engineer Nishad Singh.
The proposed sanctions are severe and targeted. Ellison has agreed to a 10-year officer-and-director bar, while Wang and Singh have agreed to an eight-year bar. All three have consented to be permanently enjoined from violating antifraud provisions of federal securities laws and to 5-year conduct-based injunctions. Crucially, they have not admitted to the SEC's allegations. These measures still require final approval from a federal court to become official and enforceable.
This action stems from the catastrophic collapse of FTX in November 2022. The SEC had previously charged the trio with defrauding investors, alleging they were actively involved in a scheme to deceive FTX investors. The agency stated that Wang and Singh created the software code that allowed Alameda to divert FTX customer funds, which Ellison then used for Alameda's trading.
The case represents a pivotal moment in crypto regulation, extending beyond the penalties for a single failed company. It signals the SEC's commitment to holding individuals personally accountable for corporate misconduct and applying traditional securities laws forcefully to crypto enterprises. The action serves as a stark warning to other crypto founders about the importance of compliance, transparency, and proper governance, potentially accelerating a shift toward more robust compliance frameworks across the industry.
The criminal cases related to the FTX collapse have already concluded. Former CEO Sam Bankman-Fried received a nearly 25-year prison sentence. Singh and Wang received no prison time, and Ellison was sentenced to two years for their roles.
