On Tuesday, federal authorities revealed more details in their case v Sam Bankman Friedthe disgraced founder of cryptocurrency exchange FTX, was arrested a day after he was arrested in the Bahamas.
Bankman-Fried is accused of defrauding customers and investors to fund a lavish lifestyle, officials said. Federal prosecutors said that starting in 2019, he diverted investor money to cover expenses, debts, and risky deals at his company. Crypto Hedge FundInc., Alameda Research, as well as making lavish purchases and illegal campaign contributions without telling his clients, according to a 13-page indictment.
“All this dirty money was used to serve Bankman Fried’s desire to buy bipartisan influence and influence the direction of public policy in Washington,” Damien Williams, US Attorney for the Southern District of New York, said during a news conference.
he is Accused of eight criminal offensesranging from telephone fraud to money laundering and conspiracy to commit fraud. Williams called the case “one of the largest frauds in American history.”
Bankman-Fried was arrested by Bahamas authorities at the behest of the US government, one day before he was scheduled to testify before House Financial Services Committee Along with current CEO of FTX, John Ray III.
FTX filed for bankruptcy on November 11 when the company ran out of funds after the cryptocurrency equivalent of a bank. Clients attempted to withdraw their assets in one go due to growing doubts about the financial strength of the company and Alameda Research.
The criminal indictment against Bankman-Fried and “the others” at FTX comes on top of the civil charges announced by the US on Tuesday. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. The SEC alleges that Bankman-Fried defrauded investors and illegally used their money to purchase real estate on behalf of him and his family.
Authorities said he carried out “deliberate” transactions intended to cover up his fraud.
Bankman Fried was once one of the world’s richest people on paper. At one point his net worth was $26.5 billion, according to Forbes. He has been a prominent figure in Washington, donating millions of dollars to mostly left-wing political causes and Democratic political campaigns, though he has given money to Republicans.
FTX has grown to be the second largest cryptocurrency exchange in the world. The SEC complaint alleges that Bankman-Fried has raised more than $1.8 billion from investors since May 2019 by promoting FTX as a safe and responsible platform for trading crypto assets.
“The entire Bankman-Fried card house began to unravel as crypto-asset prices plummeted in May 2022 and Alameda lenders demanded billions of dollars in loan repayments,” said Gurbir Grewal, director of enforcement at the SEC.
At Tuesday’s congressional hearing, the new Ray FTX CEOShe bluntly disagreed at the hearing: “We’re not going to get all of these assets back.”
In its complaint, the SEC challenged Bankman-Fried’s recent assertion that FTX and its clients were victims of a sudden market crash that overshadowed the collateral that was in place.
“FTX operates behind a veil of legality,” Grewal said. “Not only was that crust thin, it was fraudulent.”
Bankman Fried faces decades in prison.
The Associated Press contributed to this report.
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