The Securities and Exchange Commission (SEC) has charged Sam Bankman-Fried, founder of failed crypto exchange FTX, with “orchestrating a scheme to defraud investors.”
Bankman-Fried was arrested earlier on Monday, with the SEC issuing a statement on the same day that accused the former crypto boss of building a “house of cards” built on lies.
“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.
Bankman-Fried has been charged with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Gensler also sent a message to other crypto platforms, saying that the fraud allegations against FTX should be seen as a warning to obey the rules.
“The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws,” Gensler said.
The Epoch Times has reached out to Bankman-Fried with a request for comment.
Charges
The SEC alleged that Bankman-Fried concealed his diversion of FTX customers’ funds to Alameda Research, FTX’s crypto hedge fund, while raising more than $1.8 billion from equity investors, including about $1.1 billion from around 90 investors based in the United States.
While allegedly promoting FTX as a “safe” and “responsible” crypto exchange, he is accused of having “orchestrated a years-long fraud” to hide from FTX investors the diversion of their money to Alameda.
It’s also alleged that Bankman-Fried concealed FTX’s exposure to Alameda’s large holdings of FTX-linked tokens, and he’s also accused of “co-mingling” FTX customers’ funds at Alameda to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”
According to the Center for Responsive Politics, Bankman-Fried gave nearly $40 million mainly to Democratic candidates and liberal organizations during the 2022 election cycle.
In an interview in May, Bankman-Fried suggested that he would invest “north of $100 million” in the next presidential election and had a “soft ceiling” of $1 billion, although he later backtracked on this statement, calling it a “dumb quote.”
Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement that “FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created.”
“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent,” he said.
In parallel actions, the Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) have also announced charges against Bankman-Fried.
Bankman-Fried Arrested
The Bahamas attorney general’s office on Monday announced Bankman-Fried’s arrest, pending extradition to the United States.
U.S. Attorney Damian Williams confirmed the arrest at the request of the U.S. government in a statement on Twitter.
“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by the SDNY,” Williams said, referring to the Southern District of New York. “We expect to move to unseal the indictment in the morning and will have more to say at that time.”
Bankman-Fried was taken into custody after the United States notified the Bahamas attorney general’s office that it had filed criminal charges against the former crypto billionaire.
Bahamas Attorney General Sen. Ryan Pinder said that Bankman-Fried had been arrested and detained under the Bahamas Extradition Act.
“At such time as a formal request for extradition is made, the Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States,” Pinder said in a statement.
Bahamas Prime Minister Philip Davis said that both the Bahamas and the United States want to hold responsible people affiliated with FTX who may have betrayed the public trust and broken the law.
“While the United States is pursuing criminal charges against SBF individually, the Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere,” Davis said, referring to Bankman-Fried as “SBF.”
Pinder stated that the Bahamas would “promptly” extradite Bankman-Fried to the United States once the indictment is unsealed and U.S. officials make a formal request.
FTX
Founded in 2019, FTX was one of the world’s largest cryptocurrency exchanges. The firm was valued at $32 billion at its peak, while Bankman-Fried’s net worth was estimated to be $26 billion.
At the height of his success, Bankman-Fried was hailed as a philanthropist and the second-largest individual donor to the Democratic Party, providing about $40 million in the 2022 election. He claims to have contributed “about the same amount” to Republicans confidentially to avoid press scrutiny.
FTX collapsed in November amid a liquidity crisis exacerbated by larger rival Binance’s decision to withdraw from a prospective rescue arrangement.
Traders quickly withdrew billions from the platform, and the business eventually filed for Chapter 11 bankruptcy on Nov. 11. Millions of FTX users lost access to their crypto wallets.
Concerns have been raised about the $1 billion in client cash that appears to have vanished from the bankrupt cryptocurrency exchange.
Bankman-Fried claims to only have $100,000 in his bank account and denies having any “hidden funds.”
Caden Pearson and Katabella Roberts contributed to this report.
From The Epoch Times
