Federal authorities revealed more details in their case against Samuel Bankman-Fried, the disgraced founder of cryptocurrency exchange FTX, on Tuesday, a day after he was arrested in the Bahamas.
Bankman-Fried is accused of defrauding clients and investors to finance a lavish lifestyle, authorities said. Federal prosecutors said that, starting in 2019, he siphoned off his money to cover expenses, debts and risky transactions at his crypto hedge fund, Alameda Research, as well as making luxury purchases and illegal campaign contributions without informing his clients, according to an indictment. of 13 pages. .
“All of this dirty money was used in the service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington,” Damian Williams, US Attorney for the Southern District of New York, said during a press conference. .
He is charged with eight criminal offenses, ranging from wire fraud to money laundering and conspiracy to commit fraud. Williams called the case “one of the biggest frauds in American history.”
FTX FOUNDER SAM BANKMAN-FRIED ARRESTED IN THE BAHAMAS, US EXPECTED TO REQUEST EXTRADITION, AUTHORITIES SAY
FTX founder Sam Bankman-Fried is facing a spate of legal repercussions for his part in the FTX collapse. He faces several federal charges related to an alleged scheme to defraud customers.
(Jeenah Moon/Bloomberg via Getty Images)
Bankman-Fried was arrested by Bahamian authorities at the request of the US government, one day before he was scheduled to testify before the House Financial Services Committee, along with current FTX CEO John Ray III.
FTX filed for bankruptcy on November 11 when the company ran out of money after the cryptocurrency equivalent of a bank run. Clients tried to withdraw their assets in one fell swoop due to growing doubts about the financial strength of the company and Alameda Research.
The criminal indictment against Bankman-Fried and “others” at FTX builds on civil charges announced Tuesday by the US Securities and Exchange Commission and the Commodity Futures Trading Commission. The SEC alleges that Bankman-Fried defrauded investors and illegally used his money to purchase real estate on behalf of him and his family.
He executed “deliberate” transactions designed to cover up his fraud, authorities said.
Bankman-Fried was previously one of the richest people in the world on paper; at one point, her net worth reached $26.5 billion, according to Forbes. She was a prominent figure in Washington, donating millions of dollars to mostly left-leaning political causes and Democratic political campaigns, though she also gave money to Republicans.
FTX grew to become the second largest cryptocurrency exchange in the world. The SEC’s complaint alleges that Bankman-Fried has raised more than $1.8 billion from investors since May 2019 by promoting FTX as a secure and responsible platform for trading crypto assets.
“The entire Bankman-Fried house of cards began to crumble when crypto asset prices plummeted in May 2022 and Alameda lenders demanded repayment of billions of dollars in loans,” said Gurbir Grewal, director of the SEC Enforcement Division.
At Tuesday’s congressional hearing, Ray, FTX’s new chief executive, questioned him bluntly at the hearing: “We’re never going to get all these assets back.”
In its lawsuit, the SEC disputed Bankman-Fried’s recent assertion that FTX and its clients were the victims of a sudden market crash that exceeded security measures that had been put in place.
“FTX operated behind a veneer of legitimacy,” Grewal said. “That veneer was not only thin, it was fraudulent.”
Bankman-Friend faces decades in prison.
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Associated Press contributed to this report.
