FTX Founder Sam Bankman-Fried Faces Criminal Charges

Samuel Bankman-Fried, then CEO of FTX, testifies on Capitol Hill in Washington, on Feb. 9, 2022. Saul Loeb/AFP via Getty Images

Sam Bankman-Fried, founder of failed crypto exchange FTX, faces a litany of civil and criminal charges, including conspiracy to commit money laundering and wire fraud.

Following Bankman-Fried’s arrest in the Bahamas on Monday, three U.S. agencies—the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and the U.S. Attorney for the Southern District of New York (SDNY)—have all filed charges.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by the SDNY,” U.S. Attorney Damian Williams said in a statement on Twitter late Monday. That indictment has since been unsealed.

Prosecutors have charged Bankman-Fried with eight counts, according to the indictment, including wire fraud, as well as conspiracies to commit wire fraud, commodities fraud, securities fraud, money laundering, and fraud against the United States.

The indictment states that some of Bankman-Fried’s alleged crimes date back to at least 2019, when he allegedly deliberately and knowingly “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,” FTX’s crypto hedge fund, and used those misappropriated funds to make investments.

The CFTC has charged Bankman-Fried with co-mingling FTX’s customer funds with his companies’ funds in violation of the Commodities Exchange Act.

The Securities and Exchange Commission (SEC) has charged Bankman-Fried with “orchestrating a scheme to defraud investors.”

“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 in a statement.

According to the SEC, Bankman-Fried has been charged with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The Epoch Times has reached out to Bankman-Fried with a request for comment, but has not yet received a response.

His attorney, Mark Cohen from Cohen & Gresser, told media outlets that Bankman-Fried is “reviewing the charges with his legal team and considering all of his legal options.”

‘Years-Long Fraud’

The SEC alleged that Bankman-Fried concealed his diversion of FTX customers’ funds to Alameda Research, FTX’s crypto hedge fund, while raising more than $1.8 billion from equity investors, including about $1.1 billion from around 90 investors based in the United States.

While allegedly promoting FTX as a “safe” and “responsible” crypto exchange, he is accused of having “orchestrated a years-long fraud” to hide from FTX investors the diversion of their money to Alameda.

It’s also alleged that Bankman-Fried concealed FTX’s exposure to Alameda’s large holdings of FTX-linked tokens, and he’s also accused of “co-mingling” FTX customers’ funds at Alameda to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”

According to the Center for Responsive Politics, Bankman-Fried gave nearly $40 million mainly to Democrat candidates and liberal organizations during the 2022 election cycle. He also claims he donated to Republicans.

In an interview in May, Bankman-Fried suggested that he would invest “north of $100 million” in the next presidential election and had a “soft ceiling” of $1 billion, although he later backtracked on this statement, calling it a “dumb quote.”

Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement that “FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created.”

“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent,” he said.

Gensler also sent a message to other crypto platforms, saying in a statement that the fraud allegations against FTX should be seen as a warning to obey the rules.

“The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws,” Gensler said.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, on Sept. 14, 2021. Evelyn Hockstein/Reuters

Bankman-Fried Arrested

The Bahamas attorney general’s office on Monday announced Bankman-Fried’s arrest, pending extradition to the United States.

Bankman-Fried was taken into custody after the United States notified the Bahamas attorney general’s office that it had filed criminal charges against the former crypto billionaire.

Bahamas Attorney General Sen. Ryan Pinder said that Bankman-Fried had been arrested and detained under the Bahamas Extradition Act.

“At such time as a formal request for extradition is made, the Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States,” Pinder said in a statement.

Bahamas Prime Minister Philip Davis said that both the Bahamas and the United States want to hold responsible people affiliated with FTX who may have betrayed the public trust and broken the law.

“While the United States is pursuing criminal charges against SBF individually, the Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere,” Davis said, referring to Bankman-Fried as “SBF.”

Pinder stated that the Bahamas would “promptly” extradite Bankman-Fried to the United States once the indictment is unsealed and U.S. officials make a formal request.

The Albany resort, residence of Sam Bankman-Fried and other FTX and Alameda executives, in Nassau, Bahamas, on Dec. 3, 2022. Nicholas Ewing/ The Epoch Times

FTX

Founded in 2019, FTX was one of the world’s largest cryptocurrency exchanges. The firm was valued at $32 billion at its peak, while Bankman-Fried’s net worth was estimated to be $26 billion.

At the height of his success, Bankman-Fried was hailed as a philanthropist and the second-largest individual donor to the Democratic Party, providing about $40 million in the 2022 election. He claims to have contributed “about the same amount” to Republicans confidentially to avoid press scrutiny.

FTX collapsed in November amid a liquidity crisis exacerbated by larger rival Binance’s decision to withdraw from a prospective rescue arrangement.

Traders quickly withdrew billions from the platform, and the business eventually filed for Chapter 11 bankruptcy on Nov. 11. Millions of FTX users lost access to their crypto wallets.

Concerns have been raised about the $1 billion in client cash that appears to have vanished from the bankrupt cryptocurrency exchange.

Bankman-Fried claims to only have $100,000 in his bank account and denies having any “hidden funds.”

Caden Pearson and Katabella Roberts contributed to this report.