The Securities and Exchange Commission on Tuesday accused Sam Bankman-Fried of defrauding investors out of $1.8 billion, a day after the disgraced crypto mogul was arrested in the Bahamas.
The 30-year-old wunderkind — who may also be facing a criminal indictment from US prosecutors over the implosion of the FTX crypto exchange, “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 a statement.
FTX raised more than $1.8 billion from equity investors — more than half of that sum from 90 US-based investors, according to the Tuesday complaint. The SEC alleges that Bankman-Fried concealed from the investors the co-mingling of funds between FTX and Alameda Research, the sister hedge fund which he also founded.
The SEC said that Bankman-Fried treated Alameda — headed by his 28-year-old ex-girlfriend, Caroline Ellison — like his “personal piggy bank,” using “the undisclosed diversion of FTX customers’ funds … to buy luxury condominiums, support political campaigns, and make private investments, among other uses,” according to the SEC.
“None of this was disclosed to FTX equity investors or to the platform’s trading customers,” the complaint alleged.
The agency also accused SBF of directing $8 billion worth of customer deposits from a bank controlled by Alameda into a separate account known as “fiat @ftx.com” — a move possibly intended to avoid getting charged interest, according to the complaint.
Bahamian authorities arrested Bankman-Fried on Monday at the request of the United States.
“SBF’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition,” the Bahamian government said in a statement.
The disgraced, 30-year-old crypto mogul, who was scheduled to appear virtually before Congress to testify on Tuesday, has been charged with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering, according to The New York Times.
Lawmakers on the House Financial Services Committee were prepared to grill Bankman-Fried on the stunning collapse last month of his cryptocurrency exchange platform FTX, which was once valued at north of $30 billion.
FTX grew to become the second-largest cryptocurrency exchange in the world. Last month, it filed for Chapter 11 bankruptcy protection.
The company unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet.
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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.
Bankman-Fried was charged by federal prosecutors working out of the Justice Department’s Manhattan office.
US attorneys for the Southern District of New York plan to unseal the indictment later on Tuesday.
Bankman-Fried was taken into custody just after 6 p.m. on Monday. Bahamian law enforcement officials removed Bankman-Fried from his apartment complex in the Albany resort of the Bahamas, local police said in a statement.
The US will in all likelihood seek Bankman-Fried’s extradition from the Bahamas.
While the two countries have an extradition treaty, the process could take weeks if Bankman-Fried decided to contest it.
Bahamian Attorney General Ryan Pinder said the Bahamas would “promptly” extradite Bankman-Fried to the US once the indictment is unsealed and US 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.
Bankman-Fried, whose net worth at one point was valued at more than $17 billion, spent the night in a jail cell. He is scheduled to appear on Tuesday at Magistrate Court in the Bahamian capital of Nassau.
The Post has sought comment from Bankman-Fried’s spokesperson.
With Post Wires
