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Thursday, February 2, 2023
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Bankman-Fried Arrested, Charged w/ Defrauding Investors

(Headline USA) The U.S. Securities and Exchange Commission has charged the former CEO of failed cryptocurrency firm FTX—also Democrats’ second largest donor in the 2022 midterm election cycle—with orchestrating a scheme to defraud investors.

An SEC complaint filed Tuesday alleges that Sam Bankman–Fried raised more than $1.8 billion from equity investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets.

The civil complaint says Bankman–Fried diverted customer funds to Alameda Research LLC, his privately-held crypto fund, without telling them.

The complaint also says Bankman–Fried commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations. That included $37 million to Democrats and $240,200 to Republicans.

One of those beneficiaries, out-going House Financial Services chair Maxine Waters, D-Calif., had invited Bankman–Fried to testify Tuesday as part of a House hearing into the collapse of his once celebrated crypto company.

Instead, Bankman–Fried was arrested Monday in the Bahamas at the request of the U.S. government, U.S. and Bahamian authorities said.

The arrest was made after the U.S. filed criminal charges that are expected to be unsealed Tuesday, according to U.S. Attorney Damian Williams.

Bankman–Fried had been under criminal investigation by U.S. and Bahamian authorities following the collapse last month of FTX, which filed for bankruptcy on Nov. 11, when it ran out of money after the cryptocurrency equivalent of a bank run.

The SEC charges are separate from the criminal charges expected to be unsealed later Tuesday.

A spokesman for Bankman-Fried had no comment Monday evening. Bankman-Fried has a right to contest his extradition, which could delay but not likely stop his transfer to the U.S.

Waters said she was “disappointed” that the American public, and FTX’s customers, would not get to see Bankman-Fried testify under oath.

That hearing, however, will be held Tuesday despite the arrest.

Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.

That all unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet.

Customers moved to withdraw billions of dollars, but FTX could not meet all the requests because it apparently used its customers deposits to cover bad bets at Bankman–Fried’s investment arm, Alameda Research.

Bankman-Fried said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.

Adapted from reporting by the Associated Press

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