For a month now, Samuel Bankman-Fried has been in the news for his fraudulent actions and mishandling of funds with FTX Trading Ltd. Today, he was formally charged by the Securities and Exchange Commission (SEC) of orchestrating a scheme to defraud investors.
As FTX is accused of misusing billions of dollars in client funds, SBF, the former CEO of the collapsed crypto exchange FTX, repeatedly denied in interviews that he was unaware of the improper use of customer funds.
In a recent interview with ABC News, SBF stated he regrets not taking much more responsibility for understanding how the company collapsed. However, there were explicit mechanisms in place allowing lending and borrowing on his crypto exchange; yet there was still no proper oversight which led to its demise.
However, in accordance with a press release from the SEC, SBF has been accused of misleading investors. Additionally, investigations into further alleged violations of the Securities and Exchange Act are underway as well as those associated with the allegations.
SEC Chair Gary Gensler asserted that SBF built a house of cards on a foundation of deception while telling investors they were safe:
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.
FTX Former CEO Raises Over $1.8B From Investors
The press release claims that since at least May 2019, FTX has raised more than $1.8 billion from equity investors, of which over $1.1 billion came from roughly 90 American investors.
The SEC complaint claims that he ran a multi-year scheme to defraud FTX’s investors by concealing the secret transfer of FTX customers’ funds to his privately held cryptocurrency hedge fund, Alameda Research.
Allegedly, they provided Alameda unrestricted access to the FTX platform’s resources, including funding and exemption from specific risk mitigation measures.
The complaint also details how “Bankman-Fried used commingled FTX customers’ funds at Alameda” for personal investment endeavors that included making large political donations and luxurious real estate purchases.
Nevertheless, the SEC’s complaint seeks an injunction that bars Bankman-Fried from issuing, purchasing, offering, or selling any securities – other than for his own personal account – as well as disgorgement of all assets gained illegally.
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