The Securities and Exchange Commission on Tuesday charged Sam Bankman-Fried with defrauding investors out of $1.8 billion, a day after the disgraced crypto-tycoon was arrested in the Bahamas.
The 30-year-old prodigy – who could face criminal charges in connection with the explosion of the FTX crypto exchange – built a house of cards by lying to investors that it was one of the safest buildings. in crypto,” SEC Chairman Gary Gensler said in a statement.
According to Tuesday’s filing, FTX has raised more than $1.8 billion from shareholders — more than half of that amount from 90 U.S. investors. The SEC alleges that Bankman-Fried concealed from investors a merger between FTX and Alameda Research, a sister hedge fund he founded.
The SEC alleges that Bankman-Fried treated Alameda, led by his 28-year-old ex-girlfriend Caroline Ellison, as his “personal piggy bank” and “by anonymously diverting funds from FTX clients . .. used to purchase and maintain luxury condominiums. Using political campaigns and private equity for other purposes, according to the SEC.
“None of this was disclosed to FTX shareholders or trading clients of the platform,” the complaint said.
The agency also accused SBF of diverting $8 billion in customer deposits from the Alameda-run bank to a separate account known as “fiat @ftx.com” — to avoid paying interest, according to the complaint.
Bahamian authorities arrested Bankman-Fried on Monday at the request of the United States.
“SBF’s arrest follows receipt of official notification from the United States that it has criminal proceedings against SBF and may seek his extradition,” the Bahamian government said in a statement.
The disgraced 30-year-old crypto-tycoon, who is scheduled to appear before Congress to testify on Tuesday, has been charged with wire fraud, wire fraud, securities fraud, securities conspiracy and money laundering. According to The New York Times.
Lawmakers on the House Financial Services Committee were poised to grill Bankman-Fried last month over the stunning collapse of cryptocurrency exchange platform FTX, once valued north of $30 billion.
FTX has become the second largest cryptocurrency exchange in the world. Last month, it filed for Chapter 11 bankruptcy protection.
The company quickly opened up last month when reports cast doubt on the strength of FTX’s balance sheet.
Customers tried to withdraw billions of dollars, but FTX was unable to accommodate all requests because it used its customers’ deposits to cover bad bets at Bankman-Fried’s Alameda Research investment arm.
Bankman-Fried recently said he did not “knowingly” misappropriate customer funds and said he believed his millions of angry customers would eventually be healed.
Bankman-Fried was indicted by federal prosecutors working in the Justice Department’s Manhattan office.
U.S. attorneys for the Southern District of New York plan to file charges Tuesday evening.
Bankman-Fried was arrested Monday just after 6 p.m. Bahamian law enforcement officers took Bankman-Fried out of an apartment complex in the Bahamas resort of Albany, local police said in a statement.
The US is likely to seek Bankman-Fried’s extradition from the Bahamas.
While the two countries have an extradition treaty in place, the process could take weeks if Bankman-Fried decides to challenge it.
Bahamas Attorney General Ryan Pinder said the Bahamas will extradite Bankman-Fried to the United States “promptly” once the indictment is unsealed and a formal request is made by US authorities.
FTX is headquartered in the Bahamas, and Bankman-Fried has largely remained at his luxury Bahamian compound in Nassau since the company’s failure.
Bankman-Fried, who was once worth more than $17 billion, spent the night in a jail cell. He is scheduled to appear in a magistrate’s court in Nassau, the Bahamian capital, on Tuesday.
The Post has reached out to a spokeswoman for Bankman-Fried for comment.