U.S. authorities have charged former FTX CEO Sam Bankman-Fried (SBF) with fraud a month after the crypto exchange he founded filed for bankruptcy. Moreover, the U.S. CFTC and the U.S. SEC have filed fraud complaints against SBF and his companies FTX and Alameda Research. The complaints charge them with fraud and material misrepresentations in connection with the sale of digital assets. The CFTC complaint asserts that their actions caused the loss of over $8 billion in FTX customer deposits.
Fraud, Misrepresentations & Manipulation
Politicians and the press are already calling the FTX case the biggest financial fraud in America’s history. An eight-count indictment filed by the Southern District of New York accuses Bankman-Fried of committing or conspiring to commit fraud against FTX customers and lenders, money laundering, defrauding the United States and violating campaign finance disclosure laws.
The SEC’s complaint alleges that SBF and its employees manipulated the FTX software, diverting customer funds to Alameda Research.
The indictment alleges that the jailed former CEO “agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund.”
Arrest & Extradition
SBF was arrested in the Bahamas on Monday, a day before he was scheduled to testify virtually before a House Financial Services Committee hearing on his company’s collapse. He is in Fox Hill Prison in Nassau awaiting extradition to the U.S. SBF has announced it will appeal the extradition. However, his release on bail has been denied and SBF must remain in Fox Hill Prison, which is one of the worst prisons in the world and is known for its poor standards. Whether this will possibly persuade SBF to agree to extradition remains to be seen.
The campaign finance allegations accuse Bankman-Fried of “making corporate contributions to candidates and committees in the Southern District of New York that were reported in the name of another person,” straw contributions intended to circumvent campaign finance disclosure laws.