SEC Charges Sam Bankman-Fried With Defrauding Investors

The SEC has finally come for disgraced FTX founder Sam Bankman-Fried, slapping the former billionaire with fraud charges

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Less than a day after Bahamian authorities arrested Sam Bankman-Fried, the US Securities and Exchange Commission (SEC) has slapped the fallen FTX founder with its own charges.

“The [SEC] today charged Bankman-Fried with orchestrating a scheme to defraud equity investors in [FTX], the crypto trading platform of which he was the CEO and co-founder,” the agency said in a statement.

“Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”

SEC regulators say FTX under Bankman-Fried raised more than $1.8 billion from equity investors since May 2019 — with more than $1.1 billion of those funds coming from roughly 90 US-based investors.

Bankman-Fried promoted FTX as a safe and responsible crypto exchange, the SEC said, “specifically, touting FTX’s sophisticated, automated risk measures to protect customer assets. 

The complaint alleges Bankman-Fried exacted a years-long fraud to conceal from FTX equity investors three major aspects of the firm’s operations:

  • diversion of FTX user funds to his trading unit Alameda Research,
  • special treatment afforded to Alameda on the FTX platform — including a virtually unlimited “line of credit” funded by the platform’s customers,
  • increased risk due to FTX’s exposure to Alameda’s significant foldings of “overvalued, illiquid assets such as FTX-affiliated tokens.”

“The complaint further alleges that Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations,” the SEC said.

The SEC has charged Bankman-Fried with violating anti-fraud provisions, and seeks injunctions including one that prohibits him from handling securities professionally, disgorgement, civil penalties, and a bar from serving as an officer or director of a company moving forward.

Additional, parallel charges have also been filed by the Commodity Futures Trading Commission (CFTC) and the US Attorney’s Office for the Southern District of New York, per the statement.

Calls for Bankman-Fried to face legal action for his alleged wrongdoing have echoed across the crypto space since FTX suddenly went belly up last month. 

Now, those pleas are finally being met.


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