Sam Bankman-Fried, Crypto Boss Who Went Bankrupt, Arrested In The Bahamas

Sam Bankman-Fried, the founder and former CEO of crypto exchange FTX, has been charged by the US Securities and Exchange Commission with defrauding investors in the company. The SEC said: “The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud investors in the shares of FTX Trading Ltd, a cryptocurrency trading platform of which he was the CEO and co-founder.

Investigations into other violations of the Securities Act and other entities and persons related to the alleged misconduct are ongoing.” The SEC said Bankman-Fried concealed his diversion of FTX customer funds to Alameda Research, FTX’s crypto hedge fund, while raising more than $1.8 billion (£1.5 billion) from investors, including about $1.1 billion from about 90 investors from the US. 

“We allege that Sam Bankman-Fried built a house of cards based on fraud, telling investors that it was one of the safest buildings in cryptocurrency,” SEC Chairman Gary Gensler said. “The alleged fraud committed by Mr. Bankman-Fried is a challenge to crypto platforms to comply with our laws.”

The SEC further alleges that Bankman-Fried used funds from FTX customers, mixed with Alameda’s equity, “to make undisclosed venture investments, lavish real estate purchases and large political donations.” However, the SEC’s focus is on harming investors rather than customers. With $1.1 billion raised from US-based investors, the agency is asserting its right to oversee the case, even though FTX itself is nominally based in the Bahamas.

“The collapse of FTX highlights the very real risks that trading platforms for trading unregistered crypto assets can pose to investors and customers alike,” said Gurbir S Grewal, Director of the SEC’s Division of Enforcement. “While we continue to investigate FTX and other entities and individuals for possible violations of federal securities laws as set forth in our complaint, today we hold Mr. Bankman-Fried accountable for fraudulently obtaining billions of dollars from FTX investors and misappropriating funds belonging to to FTX business customers.”

Bankman-Fried is unusually very public about the FTX collapse, even as the investigation is ongoing. In an interview with Bloomberg’s Zeke Faux in late November, he cited $6.5 billion in losses from FTX and Alameda that resulted in the insolvency of both companies, including “$250 million in real estate, $1.5 billion in expenses, $4 billion $1.5 billion in venture capital investments, $1.5 billion in acquisitions and $1 billion labeled as ‘fuck-ups'”. 

Earlier this month, he told a conference in New York: “Look, I screwed up,” but insisted he “never tried to commit fraud” and was “shocked” by the collapse of his businesses. On Monday, police in the Bahamas arrested Bankman-Fried, the country’s attorney general said in a statement, adding that they had received formal notification of criminal charges against him from the US. Additional charges are pending from the US Attorney for the Southern District of New York and the Commodity Futures Trading Commission, according to the SEC.