US charges Sam Bankman-Fried with defrauding investors
The US Securities and Exchange Commission (SEC) has charged Sam Bankman-Fried with “orchestrating a scheme to defraud investors” in the failed cryptocurrency exchange FTX.
The former FTX boss was arrested on Monday.
Mr Bankman-Fried built a “house of cards on a foundation of deception” SEC Chair Gary Gensler said.
He added that the alleged fraud was a warning for other platforms to comply with US laws.
Since 2019, Bahamas-based FTX had raised more than $1.8bn (£1.46bn) from equity investors, the SEC said, including approximately $1.1 billion from about 90 US-based investors.
It is alleged that while Mr Bankman-Fried promoted FTX as a “safe, responsible crypto asset trading platform”, in reality he “orchestrated a years-long fraud” to conceal from FTX’s investors the diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund.
The SEC also alleges he concealed FTX’s exposure to Alameda’s significant holdings of overvalued FTX-affiliated tokens.
Mr Bankman-Fried is also accused of “co-mingling” FTX customers’ funds at Alameda to make “undisclosed venture investments, lavish real estate purchases, and large political donations”.
“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created,” said Gurbir S Grewal, director of the SEC’s Division of Enforcement.
“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent.”
He added that FTX’s collapse highlighted the risk unregistered crypto asset trading platforms can pose to consumers and investors.
The SEC charged Mr Bankman-Fried with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) also announced charges against Mr Bankman-Fried in parallel actions.
