By Michael Scott
The embattled Caroline Ellison has indicated engaging former SEC staff Stephanie Avakian, who oversaw notable enforcement in past crypto cases. The former head at Alameda Research is battling several probes following the catastrophic downfall of FTX Group.
Avakian, who previously served as the division chief in the watchdog, confirmed leading other counsels working at her firm WilmerHale. Attempts to confirm the engagement from the law firm turned futile as its spokesperson declined to grant an audience.
Ellison Battling Alleged Perpetrator’s Role in FTX Fraud
Ellison is facing a probe over an alleged role in FTX fraud where billions of users’ funds at the exchange were rerouted to Alameda. Avakian is set to take an active part in defending Ellison in the series of probes by the US congress, SEC, Bahamas SEC, Manhattan prosecutors, and US Department of Justice (DOJ).
Besides, the present management announced assembling a forensic team led by AlixPartners to probe the mysterious disappearance of $450 million days before the bankruptcy filing on November 11. Avakian will face off with the FTX bankruptcy team led by Matt Jacques, a colleague at SEC who served in the chief accountant position.
It is inevitable for Ellison to assemble a team of experienced counsel, given the mounting evidence of Alameda Research’s wrongdoing in misusing users’ deposits in the FTX. Recently, FTX’s founder Sam Bankman-Fried, in his media interviews, has continually cast blame on Alameda Research under the reign of Ellison for the crypto exchange’s downfall. In contrast, Ellison has exercised silence, prompting speculation of weighing cooperating with the authorities.
Former Colleagues Face Each Other in Opposing Camps
Before joining WilmerHale in 2020, Avakian worked in the SEC for six years. She served four years as a top-ranking enforcement director after deputizing the post for two years. Her engagement at SEC involved working with Steve Peikin as a co-director. Coincidentally, Peikin is now hired by the FTX to mount evidence that will incriminate Avakian’s client Ellison during the bankruptcy proceedings. Though now in opposing camps, the two counsels are lauded for initiating successful enforcement actions within the cryptos sectors.
Avakian was involved in the notable case pitting the regulator against blockchain firm Ripple Labs. The firm’s founders battled the allegations of illegally offering unregistered digital assets securities to raise $1.3 billion. The suit initiated in 2020 still attracts endless debate on crypto assets’ treatment as securities. Avakian has commenced enforcement actions against notable brands, including General Electric, Elon Musk of Tesla Inc., and Robinhood Markets.
Ellison’s defense team is counting on Anjan Sahni, a partner in WilmerHale. Sahni worked as a federal prosecutor and rivaled Damian Williams to become the US president’s attorney within the Southern District region in New York.
Ellison’s defense team admitted facing former colleagues representing the plaintiffs in the case. In particular, Sahni will face the South District, given it is leading the criminal scrutiny. Sahni admitted to working in the office for ten years. Her tenure featured Bernie Madoff’s investigation for alleged insider trading. Sahni oversaw the probe as the head of Southern District’s fraud units before exiting in 2015.
While Ellison has not directly confirmed engaging Sahni and Avakian, their recent visits to the Lower Manhattan prosecutor’s offices affirm the speculation.