FTX Founder, Sam Bankman-Frieds House of Cards Teeters

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SBF in custody

The dramatic rise and fall of Sam Bankman-Fried, the founder of failed crypto exchange FTX, came full circle on Monday, with his arrest in the Bahamas at the request of US authorities, followed by the filing by the SEC of its own accusations on Tuesday.

The Times reports that federal prosecutors in Manhattan, who are seeking his extradition, will charge Mr. Bankman-Fried with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. . A trial could begin at the end of next year.

Sam Bankman-Fried built a house of cards based on deception while telling investors it was one of the safest buildings in crypto, says SEC Chairman Gary Gensler , in a press release. His agency accused SBF, as the entrepreneur is known, of defrauding investors in FTX out of $1.8 billion, including $1.1 billion from US entities. Much of the fraud, he alleges, was keeping backers in the dark about the undisclosed diversion of FTX client funds to the exchanges’ trading subsidiary, Alameda Research.

The SEC is now claiming that SBF was more involved in the Alamedas operations than it let on. In a major revelation, the agency claims he directed $8 billion in customer deposits from an Alameda-controlled bank to a separate account, labeled [email protected], in part to avoid being charged fees. interests, a decision that might suggest intention. From the complaint:

In 2022, FTX began trying to separate the Alamedas portion of [email protected] account liabilities from the portion attributable to FTX (i.e. to separate customer deposits sent to Alameda-controlled bank accounts from deposits sent to FTX-controlled bank accounts). The Alameda portion, which amounted to over $8 billion in FTX client assets that had been deposited in bank accounts controlled by Alameda, was initially moved to another account in the FTX database. However, because this change caused FTX’s internal systems to automatically charge Alameda interest on liabilities of more than $8 billion, Bankman-Fried ordered that Alameda’s liabilities be transferred to an account that would not be no interest charged.

The arrest surprised more than one. SBF was scheduled to testify before the House Financial Services Committee on Tuesday. The Democratic Committee Chair, Rep. Maxine Waters of California, didn’t see that coming: the public is eagerly awaiting these answers under oath before Congress, and the timing of this arrest robs the public of that opportunity, she said. (SBF himself also said he didn’t expect to be arrested.)

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