Bankman-Fried arrested and charged with fraud and money laundering

SEC accuses Bankman-Fried of using customer funds to make ‘undisclosed venture investments, lavish real estate purchases, and large political donations’

FTX US                                 
Sam Bankman-Fried speaks during a House Committee on Financial Service hearing in Washington last year – Photo: Jabin Botsford/The Washington Post via Getty Images
                                

Sam Bankman-Fried, the man at the centre of the FTX scandal, has been arrested by Bahamian police.

After the arrest, authorities in both The Bahamas and the United States charged the former billionaire with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.

In a statement, Bahamian Prime Minister Philip Davis said: “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.

“While the United States is pursuing criminal charges against SBF individually, the Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere.”

The arrest is the first move by regulators to hold those responsible for the multibillion-dollar collapse of one of the world’s largest cryptocurrency exchanges. 

Bankman-Fried was one of the wealthiest and most influential figures in the burgeoning cryptocurrency sector. His support helped propel a number of projects to prominence, such as Solana, and his proposals for the future of crypto regulation were listened to by legislators and regulators alike. 

This all came to an end in November, however, when reports that FTX’s leadership had misused client money triggered the crypto exchange equivalent of a bank run. 

After further details of Bankman-Fried’s alleged mismanagement emerged, the 30-year-old executive stood down and FTX filed for Chapter 11 bankruptcy protection. The array of companies that fall under the FTX umbrella owe more than $3bn to their 50 largest creditors and could have more than one million total creditors. 

On Tuesday, the US Securities and Exchange Commission revealed that it will file separate charges against Bankman-Fried, outlined a desire to ban him from the crypto industry and accused him of “orchestrating a scheme to defraud equity investors in FTX”.

The SEC maintained that despite portraying himself as a responsible leader of the crypto community, 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 chair of the SEC, Gary Gensler, said: "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."

The timing of the arrest has frustrated some US legislators. Republican Congressman Lee Zeldin noted that the FTX founder was scheduled to testify in front of House Financial Services  Committee this week and asked: “Why not allow him to first testify tomorrow and answer our many questions?”

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