The U.S. government charged Sam Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX, with a host of financial crimes on Tuesday, alleging he intentionally deceived customers and investors to enrich himself and others, while playing a central role in the company害羞草研究所檚 multibillion-dollar collapse.
The 13-page indictment says that, beginning in 2019, Bankman-Fried devised 害羞草研究所渁 scheme and artifice to defraud害羞草研究所� FTX害羞草研究所檚 customers and investors, diverting their money to pay expenses and debts at his crypto hedge fund, Alameda Research, and to make lavish real estate purchases and large political donations.
Bankman-Fried was arrested Monday by Bahamian authorities at the request of the U.S. government, which charged him with eight criminal violations, ranging from wire fraud to money laundering to conspiracy to commit fraud. He was also charged with making illegal campaign contributions, a notable charge as Bankman-Fried was one of the largest political donors this year.
The charges could land Bankman-Fried in jail for decades, carrying maximum penalties of 115 years, according to Nicholas Biase, a spokesperson for U.S. prosecutors.
The criminal indictment is on top of civil charges announced earlier Tuesday by the Securities and Exchange Commission. The SEC alleges Bankman-Fried defrauded investors and illegally used their money to buy real estate on behalf of himself and family.
U.S. authorities said they will try to claw back any of Bankman-Fried害羞草研究所檚 financial gains from the alleged scheme. They are expected to request his extradition to the U.S., although the timing of that request is unclear.
A lawyer for Bankman-Fried, Mark S. Cohen, said Tuesday he is 害羞草研究所渞eviewing the charges with his legal team and considering all of his legal options.害羞草研究所�
FTX filed for bankruptcy on Nov. 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
Since FTX collapsed and before his arrest, Bankman-Fried had been holed up in his Bahamian luxury compound in Nassau. He was scheduled to appear in a Bahamian court Tuesday. The U.S. has not filed an extradition request with the Bahamas, but is expected to do so.
Bankman-Fried was one of the world害羞草研究所檚 wealthiest people on paper at one point his net worth reached $26.5 billion, according to Forbes. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns, though he also gave money to Republicans. FTX grew to become the second-largest cryptocurrency exchange in the world.
That all unraveled quickly last month, when reports called into question the strength of FTX害羞草研究所檚 balance sheet. As customers sought to withdraw billions of dollars, FTX could not satisfy all the requests because it apparently had used its customers害羞草研究所� deposits to fund investments at Bankman-Fried害羞草研究所檚 trading arm, Alameda Research.
害羞草研究所淲e 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,害羞草研究所� said SEC Chair Gary Gensler.
The SEC complaint alleges that Bankman-Fried had raised more than $1.8 billion from investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets.
Instead, the complaint says, Bankman-Fried diverted customers害羞草研究所� funds to Alameda Research without telling them.
害羞草研究所淗e then used Alameda as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses,害羞草研究所� the complaint reads. 害羞草研究所淣one of this was disclosed to FTX equity investors or to the platform害羞草研究所檚 trading customers.害羞草研究所�
Alameda did not segregate FTX investor funds and Alameda investments, the SEC said, using that money to 害羞草研究所渋ndiscriminately fund its trading operations,害羞草研究所� as well as other ventures of Bankman-Fried.
Bankman-Fried害羞草研究所檚 arrest came just a day before he was due to testify in front of the House Financial Services Committee. Rep. Maxine Waters, D-Calif., chairwoman of the committee, said she was 害羞草研究所渄isappointed害羞草研究所� that the American public, and FTX害羞草研究所檚 customers, would not get to see Bankman-Fried testify under oath.
That hearing went ahead, however, with FTX害羞草研究所檚 new CEO, John Ray III, providing withering testimony about the company害羞草研究所檚 practices.
Ray told Congress that the collapse of FTX, resulting in the loss of more than $7 billion, was the culmination of months, or even years, of bad decisions and poor financial controls.
害羞草研究所淭his is not something that happened overnight or in a context of a week,害羞草研究所� he said.
He added: 害羞草研究所淭his is just plain, old fashion embezzlement, taking money from others and using it for your own purposes. This is not sophisticated at all.害羞草研究所�
Bankman-Fried said recently that he did not 害羞草研究所渒nowingly害羞草研究所� misuse customers害羞草研究所� funds, and that he believes angry customers will eventually get their money back. Bankman-Fried has also said he believes FTX was a victim of a sudden market collapse, and that customer deposits were safe up until then.
The SEC challenged Bankman-Fried害羞草研究所檚 assertion Tuesday in its complaint.
害羞草研究所淔TX operated behind a veneer of legitimacy,害羞草研究所� said Gurbir Grewal, director of the SEC害羞草研究所檚 Division of Enforcement. 害羞草研究所淏ut as we allege in our complaint, that veneer wasn害羞草研究所檛 just thin, it was fraudulent.害羞草研究所�
The collapse of FTX 害羞草研究所� which followed other cryptocurrency debacles earlier this year 害羞草研究所� is adding urgency to efforts to regulate the industry.
Yesha Yadav, a law professor at Vanderbilt University who specializes in financial and securities regulation, said U.S. lawmakers and regulators have been too slow to act, but that is likely to change.
害羞草研究所淟awmakers are clearly under pressure to do something, given that so many people have lost their money,害羞草研究所� she said.
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By Ken Sweet
THE ASSOCIATED PRESS
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