Sam Bankman-Fried stands accused of defrauding investors out of nearly $2 billion
The US Securities and Exchange Commission (SEC) stated on Tuesday that former FTX chief executive Sam Bankman-Fried orchestrated a years-long scheme to defraud equity investors, raising more than $1.8 billion.
Bankman-Fried was arrested Monday in the Bahamas and is facing possible extradition to the US on criminal charges.
According to a statement on the SEC website, the fallen crypto billionaire concealed risks and FTX’s relationship with its trading firm Alameda Research, and used commingled customer funds.
“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 regulator says Bankman-Fried diverted billions of dollars of customer funds to help grow his other entities. Alameda Research was reportedly allowed to carry a negative balance on FTX and was exempt from the exchange’s risk protocols.
According to the SEC complaint, Bankman-Fried personally directed that FTX’s “risk engine” not apply to Alameda and hid the extent of the ties between the two companies from investors.
The SEC also charges that as late as last month, Bankman-Fried was continuing to mislead investors while trying to fill a multi-billion-dollar hole in FTX’s balance sheet. It only stopped when FTX and Alameda filed for bankruptcy protection on November 11, the regulator said.
The SEC is seeking to bar Bankman-Fried as an officer or director of a public company and to prohibit him from offering crypto or other securities. The securities market regulator is also seeking to force him to turn over his ill-gotten assets.
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