The former CEO of the bankrupt cryptocurrency company FTX has been accused by the U.S. Securities and Exchange Commission of directing a scheme to defraud investors.
According to an SEC lawsuit submitted on Tuesday, Sam Bankman-Fried promoted FTX as a secure, responsible platform for trading cryptocurrency assets, and as a result, raised more than $1.8 billion from equity investors since May 2019.
According to the court complaint, Bankman-Fried secretly transferred consumer assets to his privately held cryptocurrency fund, Alameda Research LLC, without their knowledge. Additionally, according to the complaint, Bankman-Fried mixed FTX clients’ money at Alameda to support secret startup investments, extravagant real estate deals, and substantial political contributions.
“Billions of dollars in FTX customer cash were transferred by Bankman-Fried to Alameda. Then, he used Alameda as his personal piggy bank for a variety of purposes, including purchasing opulent residences, contributing to political causes, and making personal investments “Reads the complaint. ”Neither FTX equity investors nor the platform’s trading users were made aware of any of this.”
The SEC claimed that Alameda used FTX investor funds to “indiscriminately fund its trading operations” as well as other Bankman-Fried businesses, failing to keep them separate from Alameda investments.
Gary Gensler, the chair of the SEC, said, “We allege that Sam Bankman-Fried erected a house of cards on a foundation of lies while telling investors that it was one of the safest structures in crypto.” “Mr. Bankman Fried’s -alleged fraud is a clarion call to cryptocurrency platforms that they need to comply with our laws,”
According to U.S. and Bahamian authorities, Bankman-Fried was detained on Monday in the Bahamas at the request of the American government.
According to U.S. Attorney Damian Williams, the arrest came after the U.S. filed criminal charges that are scheduled to be made public on Tuesday. Following the demise of FTX last month, which declared bankruptcy on November 11 after running out of money due to the cryptocurrency equivalent of a bank run, Bankman-Fried has been the subject of a criminal investigation by American and Bahamian authorities.
The criminal accusations, which are anticipated to be disclosed later on Tuesday, are distinct from the SEC charges.
Bankman Fried’s representative was unavailable for comment Monday night. Bankman-Fried is entitled to challenge his extradition, which might postpone but probably won’t prevent his transportation to the United States.
Just one day prior to his scheduled appearance before the House Financial Services Committee, Bankman-Fried was arrested. The committee’s chairwoman, Rep. Maxine Waters, D-Calif., expressed her “disappointment” that Bankman-Fried would not be able to testify while being sworn in front of the American people and FTX’s clients.
The hearing, however, will go forward as scheduled on Tuesday despite Bankman Fried’s -arrest.
On paper, Bankman-Fried was among the richest persons in the world; his estimated net worth was $32 billion. He was a well-known figure in Washington who gave millions of dollars to Democratic political campaigns and generally left-leaning political causes. The second-largest cryptocurrency exchange in the world is now FTX.
Last month, when reports questioned the stability of FTX’s balance sheet, everything came crashing down. Customers requested billions of dollars in withdrawals, but FTX was unable to accommodate them all because it reportedly used customer deposits to offset losing wagers at Bankman Fried’s investment arm, Alameda Research.
Bankman-Fried recently claimed that he did not “knowingly” misuse his customers’ money and that he is certain that his millions of irate clients would soon receive their money back.
In its case on Tuesday, the SEC contested that claim. “Mr. Bankman Fried gave FTX the appearance of credibility by
