SEC Officially Charges FTX Founder Sam Bankman-Fried With Fraud
All empires must eventually come to an end, and the FTX cryptocurrency trading platform is in its final stages. According to a press release filed this morning by the U.S. Securities and Exchange Commission (SEC), FTX founder and former billionaire Samuel Bankman-Fried is formally being charged with defrauding the people who invested in the platform. Charges were also announced by the Commodity Futures Trading Commission and the U.S. Attorney's Office for the Southern District of New York today.
The SEC says that Bankman-Fried deceived his customers by funneling their capital away to his private crypto hedge fund, which in turn gave the hedge fund virtually bottomless spending capabilities and awarded it special treatment on the FTX platform, including exemption from several crypto risk mitigation standards.
Bankman-Fried used the funds to make multiple luxury real estate purchases and substantial political donations, the SEC alleges. Simultaneously with his deception, the FTX co-founder assured investors that the platform was one of the safest in the crypto space.
FTX was 'a house of cards'
U.S. Securities Exchange Commission Chair Gary Gensler referred to Sam Bankman-Fried's deception and misleading as "a house of cards, on a foundation of deception." It also was a loud and clear signal to other crypto platforms to either get (or continue being) compliant with laws and regulations, he said (per SEC).
"Compliance protects both those who invest on and those who invest in crypto platforms with time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business," said Gensler. "It also shines a light into trading platform conduct for both investors through disclosure and regulators through examination authority. To those platforms that don't comply with our securities laws, the SEC's Enforcement Division is ready to take action."
The former golden child of crypto had been cooperating with authorities' investigations thus far, but Bankman-Fried was recently apprehended in the Bahamas — where FTX was headquartered — following a sealed indictment filed by the New York District Court that announced official charges. He recently indicated that his entire $22.5 billion fortune is gone among the cataclysmic collapse of his empire.