UNITED STATES: Sam Bankman-Fried, the former CEO of failed crypto business FTX, was arrested on Monday (December 12) at the request of US authorities for “one of the biggest financial frauds in US history.”
Bankman-Fried constructed a “house of cards on a foundation of deception,” said Gary Gensler, chair of the Securities and Exchange Commission (SEC).
The biggest financial fraud in US history
In parallel actions, accusations against Bankman-Fried were also announced by the Commodity Futures Trading Commission (CFTC) and the US Attorney’s Office for the Southern District of New York.
The US Attorney’s Office for the Southern District of New York announced eight criminal charges on Tuesday, which come after the US Securities and Exchange Commission (SEC) filed civil charges against the 30-year-old former billionaire, accusing him of defrauding investors by building a “house of cards” business.
The Southern District of New York’s US Attorney, Damian Williams, claimed during a news conference on Tuesday that Bankman-Fried is being charged with one of the biggest frauds in US history.
On Tuesday, a judge in the Bahamas denied Bankman-Fried’s bail after a prosecutor claimed he posed a flight risk, a report said.
Among other things, Bankman-Fried is charged with using deposits from FTX customers to pay for his hedge fund, Alameda Research Commitments, and its costs.
Additionally, it is claimed in the indictment that Bankman-Fried and the other participants planned to break federal regulations controlling political donations.
Bankman-Fried was one of the top contributors to the Democrats, but he also asserted that he contributed to the Republicans using “black money.”
Other FTX companies made financial contributions to both parties as they lobbied lawmakers for favourable bitcoin regulation.
FTX’s Collapse
Bankman-Fried’s fortune was reportedly valued at $26 billion (£21 billion) before the collapse of his business. As per analysis, he and FTX made significant contributions to media outlets, charities, and politicians, giving at least $95,000 to lawmakers investigating FTX.
Meanwhile, John Ray, the company’s new CEO, told a US congressional committee that a tiny group of “grossly inexperienced, non-sophisticated persons” appeared to have been in charge of FTX at the time of its collapse.
Last month, when FTX filed for bankruptcy in the US, many users were unable to withdraw their money. A court document from last month stated that FTX owed its 50 top creditors roughly $3.1 billion.
The SEC claims that Bankman-Fried disguised Alameda’s significant holdings of overpriced FTX-affiliated tokens, which exposed FTX to exposure.
He is further accused of “co-mingling” FTX clients’ money at Alameda to pay for “undisclosed business investments, extravagant real estate acquisitions, and big political donations.”
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, stated that FTX operated under a facade of legitimacy that Bankman-Fried created.
He continued by saying that the failure of FTX demonstrated the danger that consumers and investors may face from unregistered crypto asset trading platforms.
The Securities and Exchange Commission (SEC) accused Mr. Bankman-Fried of breaking the anti-fraud clauses of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Unusually, Bankman Fried has been talking openly about the FTX collapse even as inquiries are going on. He listed $6.5 billion in losses from FTX and Alameda, which led to the bankruptcy of both businesses, in a conversation from late November.
These losses included “$250 million for real estate, $1.5 billion for expenses, $4 billion for venture capital investments, $1.5 billion for acquisitions, and $1 billion labelled “fuck-ups.”
He said, “Look, I screwed up,” at a conference this month in New York. He insisted, though, that he “didn’t ever try to commit fraud,” and he said he was “shocked” by the collapse of his firms.
Bankman-Fried’s lawyer, Mark Cohen, stated that his client is “reviewing the charges with his legal team and contemplating all of his legal alternatives.”
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