FTX co-founder and former CEO Sam Bankman-Fried was arrested in the Bahamas yesterday and will face charges from the US Department of Justice, the Securities and Exchange Commission, and one other US government agency. Damian Williams, the Justice Department’s US Attorney for the Southern District of New York (SDNY), announced that “Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the SDNY.”
The SEC announced today that it charged Bankman-Fried “with orchestrating a scheme to defraud equity investors in FTX Trading” and that investigations into “other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.” The SEC said Bankman-Fried is also facing charges from the Commodity Futures Trading Commission (CFTC), a US agency that regulates derivatives markets.
The criminal indictment, unsealed today, was issued by a grand jury on Friday in US District Court for the Southern District of New York. Bankman-Fried was charged with eight crimes: conspiracy to commit wire fraud on customers, wire fraud on customers, conspiracy to commit wire fraud on lenders, wire fraud on lenders, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the United States and violate campaign finance laws.
Bankman-Fried was previously scheduled to testify today at a Congressional hearing on FTX’s collapse. But after his arrest in the Bahamas yesterday, he is awaiting a potential extradition. A statement from the Bahamas attorney general’s office said the US is likely to seek extradition and that the Bahamas intends to process the expected extradition request “promptly, pursuant to Bahamian law and its treaty obligations with the United States.”
SBF “considering” legal options
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” his lawyer, Mark Cohen, said in a statement provided to Ars. In a recent interview, Bankman-Fried said, “I didn’t ever try to commit fraud on anyone” but acknowledged that he “made a lot of mistakes.”
SEC Chair Gary Gensler said that “the alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws… To those platforms that don’t comply with our securities laws, the SEC’s Enforcement Division is ready to take action.”
The SEC complaint was filed in US District Court for the Southern District of New York. It said:
Bankman-Fried raised more than $1.8 billion from investors, including US investors, who bought an equity stake in FTX believing that FTX had appropriate controls and risk management measures. Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.
The alleged scheme began in May 2019, and from the beginning, “Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations,” the SEC complaint said. “Bankman-Fried hid all of this from FTX’s equity investors, including US investors, from whom he sought to raise billions of dollars in additional funds.”