Sam Bankman Fried charged with defrauding investors

After raising $1.8 billion from investors, the Securities and Exchange Commission on Tuesday charged Samuel Bankman-Fried with committing fraud, as the U.S. government hammer came down on the founder and head of bankrupt cryptocurrency company FTX Trading Ltd.
Bankman-Fried was arrested in the Bahamas just hours before the move, following charges from the U.S. Justice Department.
SBF, or Bankman-Fried, lives in the Bahamas, where their cryptocurrency exchange is based.
“After receiving formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition, SBF was arrested,” said a statement from the Bahamian Attorney General.
The SEC is seeking to bar Bankman-Fried from the securities industry and will also seek a civil fine and an officer and director bar.
SBF was expected to testify in front of a House Financial Services Committee panel on Tuesday, but they did it remotely. The criminal charges were announced before he was called to appear.
The SEC said that Bankman-Fried made undisclosed diversions of customer funds, and provided undisclosed special treatment to Alameda Research LLC, a private crypto hedge fund run by him.
The SEC also charged him with commingling FTX customers’ funds at Alameda to make undisclosed venture investments, real-estate purchases, and political donations.
“A scheme to defraud equity investors,” the SEC said, was orchestrated by the crypto whiz kid who was worth billions. The SEC said that investigations into other securities law violations, entities, and persons relating to the alleged misconduct are ongoing.
The SEC said that in his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX’s sophisticated, automated risk measures to protect customer assets. Bankman-Fried orchestrated a years-long fraud, in reality.
At least since May 2019, FTX has raised more than $1.8 billion from equity investors, including approximately $1.1 billion from about 90 U.S.-based investors.
“This is a clarion call to crypto platforms that they need to come into compliance with our laws,” said SEC Chair Gary Gensler, calling on crypto players to properly protect customer funds and separate conflicting lines of business.
The U.S. attorney’s office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) today announced parallel charges against Bankman-Fried.