SEC Slaps Sam Bankman-Fried with Fraud Charges Just a Day After His Arrest

SEC: Be Careful About Audits on Crypto Exchanges
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The US Securities and Exchange Commission (SEC) has charged beleaguered crypto exchange FTX founder, Sam Bankman-Fried (SBF) with defrauding investors and concealing that FTX was diverting customer funds to Alameda Research LLC.

This comes on the heels after SBF was arrested in the Bahamas after being criminally charged by the U.S. government. According to official press release, the SEC accused Bankman-Fried of masterminding a “massive, years-long fraud” in which he allegedly diverted billions of dollars of the trading platform’s customer funds for “his own personal benefit.”

What are the Charges?

SEC Slaps Sam Bankman-Fried with Fraud Charges Just a day after his Arrest

The civil complaint which was filed in the Southern District of New York claimed that Bankman-Fried raised more than $1.8 billion from investors who bought an equity stake in the exchange believing that FTX had appropriate controls and automatic risk management.

The SEC has further alleged Bankman-Fried with violating anti-fraud provisions, and demanding a set of orders that will prohibit him from handling securities professionally, disgorgement, civil penalties, and a bar from serving as an officer or director of a company moving forward. In a statement, SEC Chair Gary Gensler said,

“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.”

Meanwhile, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, asserted that FTX was a fraud from the very beginning with SBF personally borrowing more than $1.338 billion from Alameda, using customers’ money for investments, real estate, and political donations.

Grewal emphasized that Bankman-Fried projected FTX as a safe place to invest because of an automated “risk engine”, that would sell off a customer’s assets to make sure their collateral stayed at the required levels. The Director added,

FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine.”

SBF in Dire Straits

The press release also mentioned that additional charges would be announced on Bankman-Fried by the U.S. Attorney’s Office for the Southern District for New York and the Commodity Futures Trading Commission.

Earlier this month, SBF claimed in a live New York Times interview that he doesn’t personally think he has any criminal liability arguing,

“I didn’t ever try to commit fraud”.

On November 11, FTX and its affiliates filed for bankruptcy on 11 November following a high octane drama that reverberated across the entire crypto ecosystem.

Recently, in an internal letter, Bankman-Fried apologized to employees and former colleagues explaining the reason for the collapse of FTX. He said he felt “deeply sorry about what happened” and was pressurized to file for bankruptcy.


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