Ex-FTX CEO Sam Bankman-Fried Indicted

New York –

U.S. prosecutors on Tuesday charged the founder and former CEO of cryptocurrency exchange FTX, Sam Bankman-Fried, with a string of financial crimes and campaign finance violations, saying he played a central role in FTX’s swift collapse and concealed it from the public. its problems and investors.

The indictment alleges that Bankman-Fried allegedly carried out a years-long campaign by funneling investor money into his private hedge fund and using the funds for venture capital investments, big real estate purchases and large political donations. Fraud.

Bankman-Fried, who was arrested by Bahamian authorities on Monday at the request of the U.S. government, has been charged with eight counts ranging from wire fraud to money laundering to conspiracy to defraud the United States. He was also accused of illegally making more than $25,000 in campaign contributions, a notable allegation because Bankman-Fried is one of the largest political donors this year.

The indictment builds on civil charges announced earlier Tuesday by the Securities and Exchange Commission, which also accused Bankman-Fried of defrauding investors and using investors’ proceeds to buy real estate on behalf of himself and his family.

In addition to the charges, U.S. authorities will seek to have Bankman-Fried forfeit all financial gains he may have received as part of the scheme. They are expected to request his extradition to the United States, although the timing of that request is unclear. FTX filed for bankruptcy on Nov. 11, when it ran out of funds after what became the cryptocurrency equivalent of a bank run.

Nicholas Biase, a spokesman for the prosecutors, said the charges could carry a maximum prison time of 115 years.

Since the collapse of FTX, Bankman-Fried has been holed up in his luxurious Bahamian compound in Nassau. A spokesman for Bankman-Fried had no immediate comment on the allegations Tuesday.He has the right to challenge his extradition, which may delay but probably not prevent his transfer to the US

Bankman-Fried is one of the richest men in the world; at one point, his net worth hit $26.5 billion, according to Forbes. He is a well-known figure in Washington, donating millions of dollars to mostly left-leaning political causes and Democratic political campaigns, though he also donates to Republicans. FTX grew to become the second largest cryptocurrency exchange in the world.

That all unraveled quickly last month when reports emerged questioning the strength of FTX’s balance sheet. Customers began withdrawing billions of dollars, but FTX was unable to meet all demands as it had apparently used customer deposits to fund investments in Alameda Research, Bankman-Fried’s trading arm.

“We allege that Sam Bankman-Fried built a house of cards based on deceit while telling investors it was one of the safest structures in cryptocurrency,” said SEC Chairman Gary Gensler.

The SEC complaint alleges that Bankman-Fried raised more than $1.8 billion from equity investors since May 2019 by promoting FTX as a safe and responsible platform for trading crypto assets.

Instead, the complaint alleges, Bankman-Fried transferred clients’ funds to Alameda Research without informing them.

“He then used the Alameda as his personal piggy bank for the purchase of luxury condominiums, support of political campaigns, private investments, and other purposes,” the complaint reads. “None of this was disclosed to FTX equity investors or trading clients of the platform.”

The SEC said Alameda did not separate FTX investor funds from Alameda Investments, using the funds to “indiscriminately fund its trading operations,” as well as Bankman-Fried’s other ventures.

The day before Bankman-Fried’s arrest, he was due to testify before the House Financial Services Committee. The committee chair, Rep. Maxine Waters, D-Calif., said she was “disappointed” that Bankman-Fried’s sworn testimony was not available to the American public and FTX’s clients.

However, that hearing will take place on Tuesday, with FTX’s new CEO, John Ray III, set to testify.

Bankman-Fried recently said he did not “intentionally” misuse clients’ funds, and said he believed his millions of angry clients would eventually be whole.

The SEC disputed that claim in its complaint Tuesday.

“FTX operates under a facade of legitimacy created by Mr. Bankman-Fried to advertise, inter alia, its best-in-class controls, including a proprietary ‘risk engine’, and that FTX adheres to specific investor protection principles and detailed terms of service. But as This camouflage, as we allege in our complaint, is not only weak, but deceptive,” said Gurbir Grewal, Director of the SEC’s Division of Enforcement.

“The FTX debacle highlights the very real risks that unregistered crypto asset trading platforms can pose to investors and customers,” Grewal said.

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