U.S. financial watchdog accuses Sam Bankman-Fried of fraud in FTX collapse

According to a statement released on December 13, 2022, the U.S. Securities and Exchange Commission (SEC) has charged FTX co-founder Sam Bankman-Fried (SBF) with defrauding investors. SEC Chairman Gary Gensler explained that the U.S. financial regulator alleges that SBF has “built a house of cards on a foundation of deception.“

SEC Chairman Gary Gensler explained that the U.S. financial regulator alleges that SBF “built a house of cards on a foundation of deception.”

Following the arrest of former FTX CEO Sam Bankman-Fried (SBF) in the Bahamas, the U.S. Securities and Exchange Commission (SEC) said the SEC’s Division of Enforcement is ready to act. revealed charges against the FTX co-founder. The SEC’s complaint alleges that “Bankman-Fried orchestrated a multi-year fraud to conceal from FTX investors“the undisclosed routing of FTX client funds to Alameda Research. This included providing Alameda “a virtually unlimited ‘line of credit’ funded by the platform’s customers“.

In addition to the SEC, on December 12, 2022, after SBF’s arrest, a task force made a report that states that the U.S. Attorney’s Office for the Southern District of New York (SDNY) and SDNY attorney Damian Williams confirmed SBF’s indictment. The report notes that SBF’s charges include “wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering“.

USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.

– US Attorney SDNY (@SDNYnews) December 12, 2022

“Earlier in the evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by the SDNY“said Mr. Williams. revealed on Twitter. “We plan to request unsealing of the indictment in the morning and will have more to say at that time“. In the press release issued by the SEC, Chairman Gary Gensler explained that the U.S. regulator believes SBF is responsible for defrauding investors.

“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“, Gensler noted in a statement.

“Bankman-Fried’s alleged fraud is a clarion call for crypto platforms that they need to come into compliance with our laws“, Gensler continued. “Compliance protects both those who invest on and those who invest in crypto platforms with proven safeguards, such as adequate protection of customer funds and separation of conflicting lines of business. It also informs the conduct of trading platforms, both for investors through disclosure and for regulators through examination authority.“

Gensler also added a warning for other crypto-currency platforms:

For platforms that fail to comply with our securities laws, the SEC’s Division of Enforcement is prepared to take action.

The SEC’s charges follow the controversy surrounding Gensler and his meeting with Sam Bankman-Fried on March 29. Congressman Tom Emmer explained in a tweet that his office received reports that the SEC chairman helped SBF find legal loopholes. Yet a contradictory view of the meeting reported by Fox Business correspondent Charles Gasparino claims that Gensler gave SBF a “45-minute lecture“.

In addition, Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam recently told the press that the CFTC met with SBF about ten times before the FTX collapse. SEC Division of Enforcement Director Gurbir S. Grewal noted that “Bankman-Fried is responsible for the fraudulent collection of billions of dollars from FTX investors and the misuse of funds belonging to FTX customers.“The fraud, Grewal said, was presented as legitimate, and the SEC alleges that the perception of legitimacy was the furthest thing from the truth.

FTX operated behind a veneer of legitimacy that Mr. Bankman-Fried created, among other things, by touting its best-in-class controls, including a “risk engine“exclusive, and FTX’s adherence to specific investor protection principles and detailed terms of service, Grewal detailed.”But as we allege in our complaint, this veneer was not only thin, it was fraudulent“.

According to the SEC, SBF is also accused by other law enforcement officials and financial regulators in the United States. These include the United States Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC). The ongoing investigation will be conducted by members of the SEC’s Crypto Assets and Cyber Unit.

“The SEC’s complaint seeks injunctions against future violations of the securities law; an injunction barring Bankman-Fried from participating in the issuance, purchase, offer, or sale of any security except for his personal account; disgorgement of his ill-gotten gains; a civil fine; and a ban on his being an officer and director“, conclude the SEC’s charges against Sam Bankman-Fried.