Once an industry celebrity dubbed the “crypto whiz kid,” Sam Bankman-Fried is now detested by the whole crypto world. SBF was arrested at his home in the Bahamas on Monday, December 12. The 30-year-old is expected to appear in a Nassau court for an extradition hearing. Separately, he was also charged with defrauding investors by the United States Securities and Exchange Commission (SEC) on Tuesday, December 13.
The SEC claimed Bankman-Fried “orchestrated a years-long fraud” against investors and customers. The motive behind this was to conceal the diversion of FTX investor funds to Alameda Research, Bankman-Fried’s crypto trading house.
In a statement, SEC Chair Gary Gensler commented, “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.”
It is likely that the disgraced FTX founder will be facing multiple criminal charges. According to the SEC, Bankman-Fried is the target of other ongoing investigations. These encompass “other security law violations” in addition to other individuals and entities associated with SBF.
An indictment for Bankman-Fried was also unsealed on Tuesday in the Southern District of New York. It charges the one-time CEO with wire fraud and a laundry list of conspiracy charges. They include:
- Conspiracy to defraud investors, lenders, and the United States
- Commit commodities and securities fraud and money laundering
- Violations of campaign finance laws
The Commodity Futures Trading Commission (CFTC) announced its own charges on the same day.
Prosecutors are alleging that Sam Bankman-Fried conspired with others, in multiple schemes, to misuse FTX customer deposits to cover Alameda’s expenses. He is also facing allegations of defrauding Alameda lenders by providing misleading information about the financial health of the hedge fund.
Ironically, SBF was previously heralded as a proponent of crypto regulation. He had the ear of several important government figures and even drafted a proposal of standards to protect customers, as United States lawmakers have not passed any such legislation.
Now, the SEC is accusing Bankman-Fried of defrauding investors by touting FTX as a “safe and reliable” trading platform that utilized “sophisticated and automated” processes to safeguard customer finances. Essentially, the SEC is claiming the FTX funds were providing a carte blanche “line of credit” to Alameda.
FTX filed for bankruptcy four weeks ago. Sam Bankman Fried has publicly admitted he “screwed up” but claims, “I didn’t knowingly commit fraud.” The United States Justice Department apparently disagrees with this assessment.