Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, was arrested at his residence in the Bahamas on Monday night and criminally charged with his role in the multi-billion dollar collapse of FTX last month. He is expected to be swiftly extradited to the United States.
Bankman-Fried launched FTX in May 2019, claiming it to be “the safest and easiest way to buy and sell crypto.” With a Super Bowl ad and numerous celebrity endorsements, its valuation rose to $32 billion before its collapse. However, last month, FTX’s value suddenly plunged after investors pulled their money out based on fears of insolvency, and the company was forced to file for bankruptcy. Bankman-Fried is now accused of defrauding his customers out of $1.8 billion.
Bankman-Fried was indicted by a federal grand jury in an unsealed indictment after his arrest on Tuesday morning. The U.S. Department of Justice (DOJ) has now brought eight charges against Bankman-Fried for wire fraud, securities fraud, commodities fraud, and money laundering, as well as violation of campaign finance laws. Additionally, a civil complaint has been filed against Bankman-Fried by the Securities and Exchange Commission (SEC).
Bankman-Fried is accused of defrauding FTX customers by misappropriating their deposits to pay the expenses and debts of his private hedge fund, Alameda Research LLC, through which he made undisclosed venture investments, real estate purchases, and large political donations. When Bankman-Fried’s investments through Alameda performed poorly, he diverted billions more dollars in FTX customers’ money to prop Alameda up while lying to investors and failing to disclose FTX’s financial condition.
The DOJ’s campaign finance charges are based on allegations that Bankman-Fried sent tens of millions of dollars in stolen money to Democratic and Republican politicians and did so in ways intended to get around federal limits on campaign donations.
In a statement, SEC Chairman Gary Gensler said, “Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”
New revelations concerning the demise of FTX are sure to arise, and more charges will likely be brought against Bankman-Fried. The customers who deposited their crypto assets with FTX will see very little, if any, of their money returned.
The post Cryptocurrency Disaster: FTX CEO Arrested, Charged With Defrauding Customers for Billions appeared first on The Source.