Sam Bankman-Fried charged with fraud and money laundering

Federal prosecutors on Tuesday charged FTX Trading founder Sam Bankman-Fried with eight counts of fraud, money laundering and other financial crimes, according to an indictment unsealed Tuesday.

The U.S. attorney’s office for the Southern District of New York alleges that Bankman-Fried knowingly defrauded customers by using their cryptocurrency assets to pay for debts and expenses incurred by FTX’s hedge fund, Alameda Research. Bankman-Fried and other accomplices also purposely submitted inaccurate documents to lenders who sent funds to Alameda, according to the indictment. 

The unsealed indictment also accuses Bankman-Fried of violating political contribution laws by donating to candidates and committees in New York’s Southern District under another person’s name. 

A lawyer for Bankman-Fried, Mark S. Cohen, said Tuesday that Bankman-Fried is “reviewing the charges with his legal team and considering all of his legal options.

The maximum potential prison exposure from these charges is 115 years, according to Nicholas Biase, a spokesperson for U.S. prosecutors.

The charges come on top of fraud charges the U.S. Securities and Exchange Commission filed against Bankman-Fried on Tuesday. The SEC has accused Bankman-Fried of commingling FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases and large political donations. The Commodity Futures Trading Commission announced similar fraud charges against Bankman-Fried and FTX  on Tuesday, alleging in a lawsuit that the company caused customers to lose $8 billion in deposits. 

Authorities in the Bahamas arrested Bankman-Fried late Monday on behalf of the U.S. government for activities he allegedly engaged in while CEO of the now-bankrupt cryptocurrency exchange. He was scheduled to testify about FTX’s collapse on Tuesday before the House Financial Services Committee, but his name has been removed from the witness list.

Bankman-Fried had been under criminal investigation by U.S. and Bahamian authorities following the collapse last month of FTX, which filed for bankruptcy on Nov. 11.

FTX was one of the world’s largest cryptocurrency exchanges before it suddenly failed last month. Users withdrew roughly $5 billion of crypto assets in a single day as concerns mounted over the exchange’s solvency.

FTX raised almost $2 billion from investors over three years before its collapse. The company now owes at least $3 billion to creditors, according to bankruptcy court filings. 

Since FTX collapsed, Bankman-Fried has been holed up in his Bahamian luxury compound in Nassau. He has a right to contest his extradition, which could delay but probably not stop his transfer to the U.S.

New FTX CEO John Ray III, who is expected to testify before the House on Tuesday, said this week that FTX collapsed because the “very small group of grossly inexperienced and unsophisticated individuals” who were running the company “failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”

The Associated Press contributed to this report.