The Securities and Exchange Commission on Tuesday announced charges against Sam Bankman-Fried, a day after the disgraced FTX founder was arrested in the Bahamas.
Bankman-Fried is accused of masterminding “a years-long fraud” to hide from FTX investors the diversion of customer funds to his investment arm, Alameda Research, according to a statement from the SEC.
“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. “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.”
Bankman-Fried’s FTX has been under investigation by U.S. and Bahamian authorities since Nov. 11, when the firm ran out of money and filed for bankruptcy following the cryptocurrency equivalent of a bank run.
Before its collapse, the company grew to be the second-largest cryptocurrency exchange in the world. At that time, Bankman-Fried was regarded as one of the world’s wealthiest people with an estimated net worth of around $26.5 billion at its peak. He also boasted a large presence in Washington, donating millions of dollars toward primarily left-leaning political causes and Democratic political campaigns.
However, the company started to crumble last month after customers moved to withdraw billions of dollars. FTX could not meet all the withdrawal requests because it seemingly had used customer deposits to cover other costs.
The SEC has alleged 30-year-old Bankman-Fried used FTX customer funds, commingled with Alameda’s own capital, “to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created,” Grewal said. “But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent.”
Bankman-Fried was arrested without incident at his Bahamas apartment complex shortly after 6 p.m. ET Monday, and is set to appear in a Nassau court Tuesday.
With News Wire Services