Sam Bankman-Fred, founder and former CEO of collapsed cryptocurrency exchange FTX, has been charged with fraud by US authorities. The 30-year-old was also known as SBF Arrested in the Bahamas on Monday.
Today, a An unsealed grand jury indictment The US Department of Justice detailed the criminal charges against Bankman-Fried. He is charged with eight counts of defrauding his clients, money laundering and violating campaign finance laws.
The indictment says that Bankman Fried and his associates “knowingly” devised a scheme to defraud clients by misappropriating funds in order to “pay the expenses and debts of Alameda Research,” Bankman Fried’s private crypto fund.
Bankman-Fried was one of the major political donors who promised to contribute $1 billion to the 2022 US midterm elections – a commitment it has reneged on. However, the Justice Department said he violated campaign finance laws and deliberately misled the Federal Election Commission by funneling donations through other people.
In addition, this morning the Securities and Exchange Commission filed a filing civil complaint against Bankman-Fried, which accused him of masterminding “a massive, years-long fraud, diverting billions of dollars of trading platform clients’ funds for his own personal benefit and to help grow his crypto empire.”
The SEC complaint asks Bankman-Fried to pay damages to FTX customers and additional fines for defrauding customers. The SEC is also seeking to prevent the businessman from serving as a director or officer in any company in the future.
The SEC said Bankman-Fried transferred the funds to Alameda, its investment fund, while assuring clients that their funds were safe and that “Alameda is an entity entirely separate from FTX.” The SEC said he “knew or recklessly ignored that these statements were false and misleading”.
Once clients’ money reaches Alameda, Bankman Fried will loan it to itself and its executive team, the SEC said. These loans were “poorly documented, and sometimes not at all,” but according to the SEC, between March 2020 and September 2022, he lent himself more than $1.3 billion, which he spent on large political donations and luxury property in the Bahamas.
Even as his scheme began to spin out of control, the SEC said, Bankman Fried “continued to mislead investors and the public.” In early November, after public claims that FTX would run out of funds, the founder of FTX said, in later deleted tweets, “FTX is fine. Assets are fine” and “FTX has enough to cover all client holdings.” The SEC said Bankman-Fred knew at the time that FTX risked bankruptcy.
The company eventually entered bankruptcy on November 11, and Bankman-Fried stepped down as CEO of FTX. His fortune has dropped from about $16 billion to almost nothing.
After his departure, Bankman-Fried continued to tweet about FTX and give interviews in which he apologized for the company’s collapse while denying that it was a scam. He was supposed to appear in Congress today to testify before the House Financial Services Committee.
“We argue that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors it was one of the safest buildings in cryptocurrency,” said Gary Gensler, Chairman of the SEC. statement. He warned, “The alleged fraud committed by Mr Bankman-Fried is a clear call to crypto platforms that they need to comply with our laws.”