FTX founder faces charges of defrauding investors
The U.S. government charged Samuel BankmanFried, the founder and former CEO of cryptocurrency exchange FTX, with financial crimes on Tuesday, alleging he intentionally deceived customers and investors to enrich himself and others while playing a central role in the company’s multibilliondollar collapse.
Federal prosecutors said Bankman-Fried devised “a scheme and artifice to defraud” FTX’s customers and investors beginning in 2019, the year it was founded. He illegally diverted their money to cover expenses, debts and risky trades at Alameda Research, the crypto hedge fund that he started in 2017, and to make lavish real estate purchases and large political donations, prosecutors said in a 13page indictment.
Bankman-Fried, 30, was arrested Monday in the Bahamas at the request of the U.S. government and remains in custody after being denied bail.
He has been charged with eight criminal violations, including wire fraud, money laundering and conspiracy to commit fraud. If convicted of all the charges, Bankman-Fried — referred to by crypto enthusiasts as “SBF” — could face decades in jail.
At a news conference in New York on Tuesday, U.S. Attorney Damian Williams called it “one of the biggest frauds in American history” and said the investigation is ongoing and fast-moving.
Bankman-Fried has fallen fast from the top of the cryptocurrency industry that he helped to evangelize. FTX filed for bankruptcy on Nov. 11 after it ran out of money due to the cryptocurrency equivalent of a bank run.
Before the bankruptcy, he was considered by many in Washington and on Wall Street as a wunderkind of digital currencies, someone who could help take them mainstream, in part, by working with policymakers to bring more oversight and trust to the industry.
Bankman-Fried had been worth tens of billions of dollars — at least on paper — and was able to attract celebrities such as Tom Brady and former world leaders Bill Clinton and Tony Blair to his conferences at luxury resorts in the Bahamas. One prominent Silicon Valley firm, Sequoia Capital, invested hundreds of millions of dollars in FTX.
Sporting shorts and Tshirts to contrast himself with the buttoned-down world of Wall Street, he was the subject of fawning media profiles, a vocal advocate for a type of charitable giving known as “effective altruism,” and garnered millions of Twitter followers.
But since FTX’s implosion, Bankman-Fried and his company have been likened to other disgraced financiers and companies, such as Bernie Madoff and Enron.
A lawyer for BankmanFried, Mark S. Cohen, said Tuesday he is “reviewing the charges with his legal team and considering all of his legal options.”
Before his arrest, Bankman-Fried had been holed up in his luxury compound in the Bahamas. U.S. authorities are expected to request his extradition to the U.S.
Bankman-Fried was denied bail at a court hearing in the Bahamas on Tuesday after prosecutors argued he was a flight risk, according to Our News, a news company based there. He will remain in custody in the Bahamas until
Feb. 8, Our News reported.
Miami-Dade asked a judge on Nov. 22 to allow the county to break FTX’s 19-year, $130 million naming-rights agreement for the Miami Heat arena.