Sam Bankman-Fried Has Been Charged And Accused Of “A Massive, Years-Long Fraud"

The founder of bankrupt crypto exchange FTX was arrested in the Bahamas on Monday.

Sam Bankman-Fried, the founder and former CEO of collapsed crypto exchange FTX, has been charged with fraud by US authorities. The 30-year-old, who is also known as SBF, was arrested in the Bahamas on Monday.

Today, an unsealed grand jury indictment from the US Department of Justice detailed criminal charges against Bankman-Fried. He is charged with eight counts of defrauding his customers, money laundering, and violating campaign finance laws.

The indictment says that Bankman-Fried and his associates “knowingly” devised a scheme to defraud customers by misappropriating funds to “pay expenses and debts of Alameda Research,” Bankman-Fried’s private crypto fund.

Bankman-Fried was a major political donor who promised to contribute $1 billion in the 2022 US midterm elections — a commitment that he reneged on. However, the DOJ said that he violated campaign finance laws and intentionally misled the Federal Election Commission by funneling donations through other people.

In addition, the Securities and Exchange Commission this morning filed a civil complaint against Bankman-Fried, which accused him of orchestrating “a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”

The SEC complaint asks that Bankman-Fried pay reparations to FTX’s clients and additional fines for defrauding customers. The SEC also is seeking to bar the entrepreneur from acting as a director or officer of any company in the future.

The SEC said that Bankman-Fried diverted funds to Alameda, his privately held investment fund, while assuring clients that their money was safe and that “Alameda is a wholly separate entity from FTX.” The SEC said that he “knew or recklessly disregarded that these statements were false and misleading.”

The SEC said that once client funds were in Alameda, Bankman-Fried would lend them to himself and his executive team. These loans were “poorly documented, and sometimes not documented at all,” but, according to the SEC, between March 2020 and September 2022, he lent himself more than $1.3 billion, which he spent on large political donations and luxury property in the Bahamas.

And even when his scheme started to spiral out of control, the SEC said, Bankman-Fried “continued to mislead investors and the public.” In early November, following public allegations that FTX would run out of money, the FTX founder said, in later deleted tweets, “FTX is fine. Assets are fine” and “FTX has enough to cover all client holdings.” The SEC said that Bankman-Fried knew at the time that FTX risked bankruptcy.

The company ultimately went into bankruptcy on Nov. 11, and Bankman-Fried stepped down as CEO of FTX. His wealth fell from an estimated $16 billion to virtually nothing.

After his departure, Bankman-Fried continued to tweet about FTX and do interviews in which he apologized for the collapse of the firm while denying it was a fraud. He was supposed to appear before Congress today to testify before the House Financial Services Committee.

“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. He warned that “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.”

UPDATE

This story has been updated with news of the Justice Department's criminal charges.


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