The king and queen of crypto scams could turn on each other

They were part of a Bahamas-based “Chinese harem polyamory” group that mixed sex, pills, and crypto. Now Sam Bankman-Fried and Caroline Ellison, the two executives at the center of cryptocurrency firm FTX’s collapse, appear to be turning on each other.

After Bankman-Fried hinted that she could be to blame for $8 billion in missing client funds, Ellison may be signaling that she’s ready to upset her old friend by hiring the law firm Wilmer Hale.

Leading commercial lawyers point out that Wilmer Hale is one of the most politically networked commercial law firms in the country. It has a reputation for doing business with the Manhattan US Attorney’s Office, itself the country’s leading prosecutor for business-related crimes.

“The scoop in corporate defense circles is that Ellison is weighing whether to turn on[Bankman-Fried]and look for a plea,” said a top attorney who has worked in law enforcement. “This company is known for specializing in these deals.”

Ellison’s hiring of Wilmer Hale comes as the Manhattan Attorney’s Office seeks to file criminal charges against those responsible for what may be the biggest fraud in the industry’s history. In early November, once-popular crypto exchange FTX filed for bankruptcy as billions of customer funds disappeared from supposedly secure accounts.

Ellison and SBF are also facing civil fraud charges by the Securities and Exchange Commission, but the more serious case comes from federal prosecutors; Both Ellison and SBF could face years in prison if charged and convicted.

Caroline Ellison
Caroline Ellison worked with Sam Bankman-Fried to create a massive cryptocurrency scam.
Twitter / @carolinecapital
Sam Bankman Fried
Bankman-Fried’s company lost $8 billion in client funds.
FTX/Handout via REUTERS

Prosecutors are investigating whether FTX client funds were embezzled and used to offset losses at an affiliate prop trading fund called Alameda Research.

Alameda is said to be 90% owned by Bankman-Fried, but Ellison was CEO of the crypto fund at the time of the implosion. The two lived in a luxury penthouse in the Bahamas with a “cabbale of roommates,” where they were all reportedly dating. Writing about her interest in BDSM sex and drug use, Ellison once said that a “Chinese harem” was her preferred relationship status.

FTX and Alameda cratering sent shockwaves through the $1 trillion crypto trade, with digital coin prices zigzagging and Congress calling for tighter regulation. Billions of dollars in client funds are missing from FTX as a bankruptcy trustee tries to sort through SBF’s tangled holdings.

Caroline Ellison
Ellison hired Wilmer Hale, a leading law firm, to protect her.
Twitter / @carolinecapital

Bankman-Fried has been on a media tour lately, telling select news outlets that he still doesn’t know how much of the $8 billion in client funds have disappeared, but acknowledged he didn’t have all the proper controls in place to order to prevent the disaster.

The House Financial Services Committee will hold what is likely the first of many hearings on the FTX debacle on Tuesday. In recent weeks, SBF has said he really hasn’t spent much time trading Alameda, and has suggested to some business lawyers that he wants to blame his former girlfriend for the sinking and lack of client money.

But Ellison appears to be taking steps that show she could turn the tables on Bankman-Fried, who was once worth nearly $20 billion and has built a cult following among media figures and celebrities for his charitable giving and unorthodox, often messy, appearance.

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