FTX founder Samuel Bankman-Fried was indicted on eight criminal charges including wire fraud and conspiracy by misusing customer funds, according to an indictment from the US Attorney of the Southern District of New York.
The 30-year-old Bankman-Fried was arrested at his home in the Bahamas on Monday and was expected to appear in court in Nassau Tuesday morning for an extradition hearing.
Separately Tuesday, US markets regulators charged Sam Bankman-Fried with defrauding investors and customers in his failed crypto exchange FTX.
The Securities and Exchange Commission said Bankman-Fried, “orchestrated a years-long fraud” to conceal from FTX investors the diversion of customer funds to Alameda Research, his crypto trading hedge fund.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” SEC Chair Gary Gensler said in a statement.
The Commodity Futures Trading Commission also charged Bankman-Fried in a parallel action with the SEC.
Regulators signaled this may be just the first of multiple charges to come. The SEC said there are ongoing investigations into “other securities law violations” and into other entities and individuals.
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” said Mark S. Cohen, Bankman-Fried’s lawyer, said in a statement.
Known as “SBF,” Bankman-Fried is a crypto celebrity who became a pariah overnight as his company suffered a liquidity crisis and filed for bankruptcy last month, leaving at least a million depositors unable to access their funds.
Conspiracy and fraud charges
Prosecutors in the Southern District of New York unsealed an indictment Tuesday, charging Bankman-Fried with wire fraud and multiple counts of conspiracy, including conspiracy counts to defraud investors, lenders, and the United States, commit commodities and securities fraud and money laundering, and violate campaign finance laws.
Prosecutors allege Bankman-Fried conspired with others on numerous schemes, including misusing customer deposits held in FTX that were used to cover the expenses of Alameda. Bankman-Fried also allegedly defrauded lenders to Alameda by providing them misleading information about the hedge fund’s financial condition.
The 14-page indictment also alleges that Bankman-Fried conspired with others to violate federal election laws by making political donations to federal candidates and joint fundraising committees between 2020 and November 2022, in excess of federal legal limits and in the names of other people.
Risky bets, lavish spending
FTX achieved a $32 billion valuation by raising more than $1.8 billion since launching in May 2019, including from sophisticated investors such as BlackRock, Sequoia Capital and the Ontario Teachers’ Pension Plan. Star athletes and celebrities who backed FTX also reportedly received a stake in the company, including Tom Brady and Gisele.
The SEC alleges that Bankman-Fried duped those investors who backed FTX by promoting it as a “safe, responsible” crypto trading firm that used “sophisticated, automated” risk measures to protect customer funds.
In reality, the complaint alleges, Bankman-Fried secretly diverted FTX customer funds to effectively provide an “unlimited ‘line of credit’” to Alameda. The SEC says Bankman-Fried further concealed from investors the risk stemming from FTX’s exposure to significant holdings of overvalued, illiquid assets such as FTX-related tokens.
Bankman-Fried didn’t just use the FTX customer funds to make risky bets at his hedge fund. The SEC alleges he used that money to make undisclosed venture investments, make “lavish” real estate purchases and large political donations.
“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service,” Gurbir Grewal, director of the SEC’s division of enforcement, said in a statement. “But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent.”
‘I screwed up’
In the four weeks since FTX filed for bankruptcy, Bankman-Fried has sought to cast himself as a somewhat hapless chief executive who got out over his skis, denying accusations that he defrauded FTX’s customers.
“I didn’t knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”
But Bankman-Fried has previously admitting making mistakes while leading FTX, which he stepped down from last month after it filed for bankruptcy.
“Look, I screwed up,” Bankman-Fried said during a virtual appearance at the New York Times’ DealBook Summit. “There are things I would do anything to do over.”
Rapid descent
The speed of Bankman-Fried’s arrest caught observers, including US lawmakers, by surprise. Lawyers who aren’t involved with the case suggested the quick turnaround signals that former FTX employees may be aiding prosecutors.
“Given Bankman-Fried’s apparent inability to stop talking, the smart move by former employees would be to rush to become a cooperator in exchange for more lenient treatment, and it would not be surprising to learn that one or more of them had done so,” said Howard A. Fischer, a former SEC lawyer. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”
Andrew Jennings, an assistant professor at the Brooklyn Law School, also noted the case “has come together remarkably quickly for such a complex matter.”
“The SEC’s civil suit…includes detailed behind-the-scenes allegations about what Bankman-Fried did and knew, suggesting that the government has gotten high-value assistance from informants, including potential co-conspirators.”
https://www.cnn.com/2022/12/13/business/sam-bankman-fried-charges/index.html
Yea right this jew will get off like Epstein . Has anyone seen who this guy has been around many politicians. HE was even at the WEF . All a dog and pony show to make people think that some justice is been done on the jew theft .