Exchange Commission accuses Samuel Bankman-Fried of defrauding investors
by LORENZO CIOTTI | VIEW 267
SEC (Securities and Exchange Commission) has accused former Ftx CEO Samuel Bankman-Fried of orchestrating a scheme to defraud equity investors of the cryptocurrency trading platform of which he was a co-founder. Investigations are ongoing into other securities law violations and other entities and individuals related to the alleged misconduct.
SEC CEO Gary Gensler explained: “We argue that Sam Bankman-fried built a house of cards based on deception as he told investors it was one of the most secure buildings in crypto. The alleged fraud committed by Bankman-Fried is a clear plea to crypto platforms to comply with our laws.
Compliance protects both investors and those investing in crypto platforms with time-tested safeguards, such as properly protecting client funds and segregating conflicting lines of business. It also sheds light on the conduct of trading platforms both for investors through disclosure and for regulators through the Scrutiny Authority." The US Attorney's Office for the Southern District of New York and the Commodity Futures Trading Commission have announced charges against Bankman-Fried.
Bankman-Fried was arrested today in the Bahamas at the request of US prosecutors and is being held in custody pending an extradition trial. Since at least May 2019, FTX has raised more than $1.8 billion from equity investors, according to the SEC filing.
In his presentations to investors, Bankman-Fried promoted FTX as a safe and responsible cryptocurrency trading platform, particularly promoting FTX's sophisticated automated risk measures to protect client assets. The complaint alleges that Bankman-Fried orchestrated a years-long fraud to conceal from FTX investors: the undisclosed diversion of FTX client funds to Alameda Research LLC, The undisclosed special treatment afforded to Alameda on the FTX platform, including the provision to Alameda of an unlimited line of credit funded by customers of the platform and the exemption of Alameda from certain key FTX risk mitigation measures, the undisclosed risk arising from the FTX's exposure to Alameda's significant holdings of overvalued and illiquid assets.