NEW YORK (AP) — The U.S. Securities and Exchange Commission has charged the former CEO of failed cryptocurrency firm FTX with orchestrating a scheme to defraud investors.
An SEC complaint filed Tuesday alleges that Sam Bankman-Fried raised more than $1.8 billion from equity investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets.
The civil complaint says Bankman-Fried diverted customer funds to Alameda Research LLC, his privately-held crypto fund, without telling them. The complaint also says Bankman-Fried commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations.
Bankman-Fried was arrested Monday in the Bahamas at the request of the U.S. government, U.S. and Bahamian authorities said.
The arrest was made after the U.S. filed criminal charges that are expected to be unsealed Tuesday, according to U.S. Attorney Damian Williams. Bankman-Fried had been under criminal investigation by U.S. and Bahamian authorities following the collapse last month of FTX, which filed for bankruptcy on Nov. 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
The SEC charges are separate from the criminal charges expected to be unsealed later Tuesday.
A spokesman for Bankman-Fried had no comment Monday evening. Bankman-Fried has a right to contest his extradition, which could delay but not likely stop his transfer to the U.S.
Bankman-Fried’s arrest comes just a day before he was due to testify in front of the House Financial Services Committee. Rep. Maxine Waters, D-Calif., chairwoman of the committee, said she was “disappointed” that the American public, and FTX’s customers, would not get to see Bankman-Fried testify under oath.
That hearing, however, will be held Tuesday despite the arrest of Bankman-Fried.
Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.
That all unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet. Customers moved to withdraw billions of dollars, but FTX could not meet all the requests because it apparently used its customers deposits to cover bad bets at Bankman-Fried’s investment arm, Alameda Research.
Bankman-Fried said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
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NEW YORK (AP) — The former CEO of failed cryptocurrency firm FTX, Sam Bankman-Fried, has been arrested in the Bahamas at the request of the U.S. government, U.S. and Bahamian authorities said Monday.
The arrest was made Monday after the U.S. filed criminal charges that are expected to be unsealed Tuesday, according to U.S. Attorney Damian Williams. Bankman-Fried had been under criminal investigation by U.S. and Bahamian authorities following the collapse last month of FTX. The firm filed for bankruptcy on Nov. 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
“We expect to move to unseal the indictment in the morning and will have more to say at that time,” Williams said.
Bahamian Attorney General Ryan Pinder said the Bahamas would “promptly” extradite Bankman-Fried to the U.S. once the indictment is unsealed and U.S. authorities make a formal request. FTX is headquartered in the Bahamas and Bankman-Fried has largely remained in his Bahamian luxury compound in Nassau since the company's failure.
A spokesman for Bankman-Fried had no comment Monday evening. Bankman-Fried has a right to contest his extradition, which could delay but not likely stop his transfer to the U.S.
Bankman-Fried’s arrest comes just a day before he was due to testify in front of the House Financial Services Committee. Rep. Maxine Waters, D-Calif., chairwoman of the committee, said she was “disappointed” that the American public, and FTX's customers, would not get to see Bankman-Fried testify under oath.
Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.
That all unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet. Customers moved to withdraw billions of dollars, but FTX could not meet all the requests because it apparently used its customers deposits to cover bad bets at Bankman-Fried’s investment arm, Alameda Research.
Bankman-Fried said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
The House Financial Services Committee is still expected to hear testimony Tuesday from current CEO John Ray III. Ray, who took over FTX on Nov. 11 and is a long-time restructuring specialist, has said in court filings that the financial conditions at FTX were worse than at Enron.
Bahamian authorities plan to continue their own investigation into Bankman-Fried.
“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law,” said Bahamian Prime Minister Philip Davis, in a statement.
The U.S. Securities and Exchange Commission said it had authorized separate charges related to alleged violations of securities laws and would file them publicly Tuesday.
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CHARLOTTE, N.C. (AP) — The former CEO of the failed cryptocurrency firm FTX will testify before a Congressional committee Tuesday, his first appearance under oath since FTX filed for bankruptcy roughly a month ago.
Sam Bankman-Fried is scheduled to testify in front of the House Financial Services Committee, along with the company's current CEO, John Ray III. Bankman-Fried has done several media interviews since his firm collapsed but has not publicly testified about what happened. He is expected to appear remotely from the Bahamas.
FTX filed for bankruptcy on Nov. 11, when the firm ran out of money after the cryptocurrency equivalent of a bank run. The collapse of crypto's second-largest exchange has garnered worldwide attention, and Bankman-Fried is under criminal investigation by U.S. and Bahamian authorities.
The atmosphere Tuesday should be markedly different from Bankman-Fried's previous trips to Congress, when he testified in favor of certain bills that would regulate the crypto industry in ways that favored FTX. He became prominent in Washington and donated millions of dollars toward mostly left-leaning political causes and Democrat political campaigns, and was hailed as the new face of the crypto industry.
A handful of members of the Financial Services Committee have previously taken political donations from FTX or Bankman-Fried, including Rep. Josh Gottheimer, D-N.J. and Rep. Ritchie Torres, D-N.Y.
It wasn't clear at first whether Bankman-Fried would voluntarily agree to testify, or whether the committee would have to subpoena him. He has, more or less, remained in his Bahamian luxury compound in Nassau, and temporarily out of reach of U.S. authorities.
Rep. Maxine Waters, D-California and chairwoman of the committee, said she planned to go forward with the hearing regardless of whether Bankman-Fried agreed to testify.
This will be the first public appearance by Ray since FTX's collapse as well. Before FTX, the restructuring expert was best known for having to clean up the mess at Enron roughly 20 years ago. Ray has said in court filings that the financial conditions at FTX were worse than at Enron, and that he has no confidence in FTX's bookkeeping before he took over the firm.
“FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” Ray said in his prepared remarks for Tuesday's hearing.