Sam Bankman-Fried, founder and former chief executive of bankrupt cryptocurrency exchange FTX, has been charged by the U.S. Securities and Exchange Commission (SEC) for orchestrating a years-long fraud on investors, the agency announced on Tuesday. 

See related article: New FTX CEO says he found ‘utter failure of corporate controls’ at the exchange

Fast facts

  • The SEC alleged Bankman-Fried violated anti-fraud laws by concealing transfers of FTX customer funds to his trading firm, Alameda Research LLC, while raising more than US$1.8 billion from equity 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,” SEC Chair Gary Gensler said in the statement.
  • The SEC added that Alameda was given special treatment by the Bahamas-based exchange through a “virtually unlimited line of credit” while FTX failed to disclose its exposure to Alameda’s risky holdings of “overvalued, illiquid assets.”
  • The complaint further alleged that Bankman-Fried used customer funds for undisclosed venture investments, lavish real estate purchases, and large political donations.
  • The announcement comes less than a day after the Bahamian police arrested the 30-year-old entrepreneur at the request of U.S. authorities on reported charges of wire fraud, securities fraud and money laundering.
  • The agency said that investigations into additional violations and other entities and persons relating to the alleged misconduct are ongoing.
  • “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,” added Gensler, who has maintained that most cryptocurrencies should fall under the securities regulator’s purview.

See related article: Sam Bankman-Fried arrested in Bahamas — could other FTX executives be next?