FTX founder charged with defrauding investors
By Abigail Townsend
Date: Tuesday 13 Dec 2022
(Sharecast News) - Sam Bankman-Fried, the founder of collapsed cryptocurrency exchange FTX, has been charged with defrauding investors out of $1.8bn (£1.5bn) by the US Securities and Exchange Commission.
The 30-year-old, one of crypto's most high-profile figures, was taken into custody in The Bahamas, where he lives, at the request of US government prosecutors on Monday evening.
Bahamas attorney general Ryan Pinder said the US government had given "formal notification" of criminal charges, and that it was expected to request Bankman-Fried's extradition.
According to the SEC complaint, Bankman-Fried diverted customer funds to his first business, Alameda Research, without telling it. The funds amassed at Alameda were allegedly used to make undisclosed venture investments, lavish property purchases, and large political donations.
"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," said SEC chair Gary Gensler.
Damian Williams, US attorney for the Southern District of New York, also confirmed the arrest, tweeting overnight: "Earlier this evening Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the SDNY.
"We expect to unseal the indictment in the morning and will have more to say at that time."
FTX collapsed last month, after concerns mounted about its financial health, leading to a surge in withdrawals and a subsequent liquidity crunch.
It briefly entered into potential rescue talks with rival exchange Binance, but discussions collapsed after just two days. At the time, Binance said FTX's issues "were beyond our control or ability to help".
FTX and its trading arm Alameda Research filed for Chapter 11 bankruptcy protection shortly after, sparking widespread turmoil across the sector. According to court filings, FTX owes its 50 largest creditors more than $3bn.
Bankman-Fried has been replaced as chief executive by restructuring expert John Ray, who said in a filing last month: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."
The US Securities and Exchange Commission has also said it will file separate, civil charges in regards to alleged violations of securities laws by Bankman-Fried.
Bankman-Fried had been due to testify before the US House financial services committee this week.
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