SEC And DOJ Charge Bankman-Fried With Defrauding Investors

Mega-Democratic donor Sam Bankman-Fried faces multiple charges from the Securities and Exchange Commission and the Justice Department for the alleged years-long defrauding of investors.

The disgraced founder and former CEO of the now-bankrupt cryptocurrency firm FTX was indicted on Tuesday by federal prosecutors in the Southern District of New York on eight criminal charges. These included conspiracy and wire fraud.

The charges allege Bankman-Fried operated a “brazen” fraud from the very beginning, diverting billions in investments to his own use. Prosecutors stated that billions were invested by those who “believed his lies” concerning the safety of the investment platform.

The filing came just one day after the former CEO was arrested in the Bahamas due to a criminal indictment being issued.

The SEC claimed that Alameda Research, Bankman-Fried’s private crypto hedge fund, was the beneficiary of billions in consumer assets secretly diverted without investors’ knowledge.

It further alleged that FTX raised over $1.8 billion from investors since May 2019 that was then moved into the private fund.

The SEC said that FTX was improperly pitched as an “innovative and conservative trailblazer in the crypto markets.” Investors were assured that the firm had first-class risk protections in place to safeguard their assets.

Instead, Bankman-Fried is alleged to have spent funds on property and office space in the Bahamas, along with pouring billions into speculative investments.

And even as his empire began to collapse, the SEC said Bankman-Fried hid his lavish spending from equity investors and attempted to raise billions more to prop up his failing company.

Bankman-Fried and FTX were well known for pouring tens of billions into liberal causes, particularly during the last election cycle. Many speculate that the funds both gained favor and discouraged critical oversight into his collapsing empire.

There is now heightened pressure on U.S. regulators over their failure to have proper controls in place to prevent the FTX collapse. And while many express their desire for more stringent federal regulations, experts note that alleged fraud on this scale would bring down virtually any industry.