SEC charges former FTX CEO with defrauding crypto investors

NEW YORK (AP) — The US Securities and Exchange Commission has charged the former CEO of failed cryptocurrency firm FTX with orchestrating a scheme to defraud investors.

Bankman-Fried was arrested Monday in the Bahamas at the request of the US government, US and Bahamian authorities said.

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.

“Bankman-Fried placed billions of dollars of FTX customer funds into Alameda. He then used Alameda as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses,” the complaint reads. “None of this was disclosed to FTX equity investors or to the platform's trading customers.”

Alameda did not segregate FTX investor funds and Alameda investments, the SEC said, using that money to “indiscriminately fund its trading operations,” as well as other ventures of Bankman-Fried.

“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,” said SEC Chair Gary Gensler. “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.”

The US has also filed criminal charges that are expected to be unsealed Tuesday, according to US Attorney Damian Williams. Bankman-Fried had been under criminal investigation by US and Bahamian authorities following the collapse last month of FTX, which filed for bankruptcy on November 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 US.

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