What are the charges against Sam Bankman-Fried? Former FTX CEO who went bankrupt also charged by SEC
NASSAU, THE BAHAMAS: In connection with the over $8 billion collapse of his crypto exchange, former FTX CEO Sam Bankman-Fried was slapped with federal charges on Tuesday, December 13, 2022. According to the authorities, he misled customers to make money and used some of the "dirty money" to win support for the unregulated market on Capitol Hill.
Bankman-Fried, 30, pledged to fight deportation from the Bahamas during a trial in Nassau, where his lawyer allegedly highlighted his vegan diet and alleged diagnosis of attention deficit syndrome in an effort to keep him out of jail on a $250,000 bail. Before deciding that Bankman-Fried had a "great" danger of fleeing, Magistrate Judge Joyann Ferguson-Pratt permitted him to leave the courtroom for a limited period of time to take medication, which appeared to contain an Emsam patch used to treat mental illness, according to a New York Post report. When Bankman-Fried, who was dressed in a blue suit and white shirt, stated that he needed to "take my shirt off" to take the medicine, the judge replied, "Well, you certainly can't take your shirt off in court," according to CoinDesk.
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The suspected crypto criminal was later seen embracing his parents, who are both law professors at Stanford University when the judge refused bail. He was detained Monday evening in a gated, oceanfront resort community called the Albany. Bankman-Fried was detained pending a February 8 court date. If found guilty of all eight felonies, he may spend up to 115 years behind bars. Bankman Fried's indictment "outlines four different areas of misconduct," Manhattan US Attorney Damian Williams said during a news conference on Tuesday afternoon.
'For his personal benefit'
Bankman-Fried and unnamed associates are accused of stealing billions of dollars from FTX clients since 2019, which the accused reportedly used "for his personal benefit, including to make personal investments and to cover expenses and debts of his hedge fund, Alameda Research."
'Lied to Alameda's investors'
In order to pay off those debts, Bankman-Fried allegedly "lied to Alameda's investors about the source of the money he was using."
'Lied to FTX consumers'
Bankman-Fried is accused of lying to FTX consumers "about the fact that he had sent billions of dollars in FTX customer money to Alameda" when cryptocurrency prices crashed in May 2022.
'Made unlawful political donations'
Additionally, Bankman-Fried is accused of making unlawful political donations "to candidates and committees associated with both Democrats and Republicans" using tens of millions of dollars in Alameda funds.
“These contributions were disguised to look like they were coming from wealthy co-conspirators when, in fact, the contributions were funded by Alameda Research with stolen customer money,” Williams stated. “And all this dirty money was used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington," he added, the New York Post reports.
Williams claimed that other unnamed individuals were cooperating with the federal government and he advised Bankman-Fried's remaining suspected collaborators to do the same or risk being arrested in connection with what he dubbed "one of the biggest financial frauds in American history."
He said, "To anyone who participated in wrongdoing at FTX or Alameda Research and who has not yet come forward, I would strongly encourage you to come see us before we come to you." Williams said that his "all-hands-on-deck investigation" was "very much ongoing" and "moving very quickly," adding, "While this is our first public announcement, it will not be our last."
Charges by SEC
Bankman-Fried is also accused by the Securities and Exchange Commission (SEC) of organizing a plan to swindle equity investors in FTX Trading Ltd. In the SEC's lawsuit, it is stated that since at least May 2019, the Bahamas-based FTX has acquired more than $1.8 billion from equity investors, comprising about $1.1 billion from around 90 US-based investors.
Bankman-Fried, according to Gurbir Grewal, director of enforcement for the Securities and Exchange Commission, "raised more than $1.8 billion from equity investors on the basis of lies" while operating "behind a veneer of legitimacy," as cited by the New York Post. However, according to Grewal, "the entire house of cards started to crumble as while crypto prices plunged in May 2022"
"That collapse has had far-reaching consequences for FTX customers, for its investors, and for its counterparties,” he stated, adding, “But one immediate takeaway from today’s announcement should be that non-compliant trading platforms pose dramatic risks to both their investors and to their customers." He added, "Among other things, they don’t provide them with the same robust level of disclosures and protections against fraud and conflicts of interest. That’s what traditional, US-registered securities exchanges provide. So it’s imperative that non-compliant platforms come into compliance."