Sam Bankman-fried Facing 'Massive Fraud' Charges Over FTX Scam: SEC

The United States Securities and Exchange Commission SEC, said it is filing charges against FTX founder Sam Bankman-Fried on Tuesday, accusing him of "orchestrating a scheme to defraud equity investors in FTX" and seeking to ban him from the cryptocurrency industry.

"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 charges also include money laundering and illegal campaign contributions. SBF had reportedly funneled millions of dollars to Democrat politicians and the Democrat party in US. He was the biggest donor to the left-wing party.

The SEC made the charging announcement on Monday, shortly after Bahamian authorities arrested Bankman-Fried, the US Attorney's Office Southern District of New York confirmed.

According to SEC: "Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire."

SEC charged Bankman-Fried for orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX). The regulatory body noted that the former CEO concealed his "diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors."

Here are some of the 8 charges in the document from US Attorney at the SDNY.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Plaintiff: SECURITIES AND ) EXCHANGE COMMISSION,

Defendant: SAMUEL BANKMAN-FRIED Plaintiff Securities and Exchange Commission (the “Commission”), for its complaint against Defendant, Samuel Bankman-Fried (“Bankman-Fried”), alleges as follows:

SUMMARY

1. From at least May 2019 through November 2022, Bankman-Fried engaged in a scheme to defraud equity investors in FTX Trading Ltd. (“FTX”), the crypto asset trading platform of which he was CEO and co-founder, at the same time that he was also defrauding the platform’s customers. Bankman-Fried raised more than $1.8 billion from investors, including U.S. investors, who bought an equity stake in FTX believing that FTX had appropriate controls and risk management measures. Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.

2. Throughout this period, Bankman-Fried portrayed himself as a responsible leader of the crypto community. He touted the importance of regulation and accountability. He told the public, including investors, that FTX was both innovative and responsible. Customers around the world believed his lies, and sent billions of dollars to FTX, believing their assets were secure on the FTX trading platform. But from the start, Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC (“Alameda”), and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.

3. Bankman-Fried hid all of this from FTX’s equity investors, including U.S. investors, from whom he sought to raise billions of dollars in additional funds. He repeatedly cast FTX as an innovative and conservative trailblazer in the crypto markets. He told investors and prospective investors that FTX had top-notch, sophisticated automated risk measures in place to protect customer assets, that those assets were safe and secure, and that Alameda was just another platform customer with no special privileges. These statements were false and misleading. In truth, Bankman-Fried had exempted Alameda from the risk mitigation measures and had provided Alameda with significant special treatment on the FTX platform, including a virtually unlimited “line of credit” funded by the platform’s customers.

4. While he spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments, Bankman-Fried’s house of cards began to crumble. When prices of crypto assets plummeted in May 2022, Alameda’s lenders demanded repayment on billions of dollars of loans. Despite the fact that Alameda had, by this point, already taken billions of dollars of FTX customer assets, it was unable to satisfy its loan obligations. Bankman-Fried directed FTX to divert billions more in customer assets to Alameda to ensure that Alameda maintained its lending relationships, and that money could continue to flow in from lenders and other investors.

5. But Bankman-Fried did not stop there. Even as it was increasingly clear that Alameda and FTX could not make customers whole, Bankman-Fried continued to misappropriate FTX customer funds. Through the summer of 2022, he directed hundreds of millions more in FTX customer funds to Alameda, which he then used for additional venture investments and for “loans” to himself and other FTX executives. All the while, he continued to make misleading statements to investors about FTX’s financial condition and risk management. Even in November 2022, faced with billions of dollars in customer withdrawal demands that FTX could not fulfill, Bankman-Fried misled investors from whom he needed money to plug a multi-billion-dollar hole. His brazen, multi-year scheme finally came to an end when FTX, Alameda, and their tangled web of affiliated entities filed for bankruptcy on November 11, 2022.

Read the full complaint