December 3, 2023


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FTX Co-Founder Sam Bankman-Fried Charged With Fraud, Denied Bail

FTX Co-Founder Sam Bankman-Fried Charged With Fraud, Denied Bail

Sam Bankman-Fried, the co-founder and former CEO of collapsed crypto exchange FTX, was arrested Monday in the Bahamas, the attorney general’s office for the Bahamas said in a statement.

The arrest came after the US government notified the office that it had filed criminal charges against Bankman-Fried and would likely seek extradition, the Bahamas AG office said. 

Damian Williams, the US Attorney for the Southern District of New York, confirmed Monday’s arrest and unsealed the 14-page indictment Tuesday. Bankman-Fried faces eight counts of conspiracy and criminal activity related to wire fraud, commodities fraud, securities fraud, money laundering and violation of campaign finance laws. 

Separately, the US Securities and Exchange Commission filed civil charges on Tuesday against Bankman-Fried for allegedly violating securities law and “orchestrating a scheme to defraud equity investors in FTX Trading Ltd.”

“We allege that 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,” SEC Chair Gary Gensler said in a statement. “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.” 

Compliance measures include “time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business,” Gensler said.

A magistrate judge in the Bahamas on Tuesday denied Bankman-Fried’s request to be released on bail, citing a heightened risk of flight and ruling that the onetime billionaire should stay in Bahamian custody until Feb. 8, 2023.

Bankman-Fried, also known as SBF, resigned as FTX’s CEO in November after the beleaguered cryptocurrency platform filed for Chapter 11 bankruptcy protection. The Bahamas-based exchange had been one of the biggest players in cryptocurrency, and Bankman-Fried was renowned for his lobbying of politicians on both sides of the aisle. But FTX’s meltdown has raised doubts about cryptocurrency and has left customers wondering if they’ll ever get their money back. 

Revelations about the holdings and the close relationship between FTX and sister trading firm Alameda Research — over a third of the assets on Alameda’s balance sheet were FTT tokens issued by FTX — triggered a cascading series of events in November that led Alameda to cease operations and FTX to file for bankruptcy protection. Billions in investors’ funds seemingly vanished overnight. 

“I was the CEO of FTX. That means I was responsible,” Bankman-Fried said during a live interview at The New York Times’ Dealbook Summit on Nov. 30. He has denied any criminal wrongdoing or intent.

The US Department of Justice and other agencies are investigating allegations of fraud and mishandling of funds by FTX. Bankman-Fried has denied committing fraud or purposely misusing customer money.

Bankman-Fried had agreed to testify on Tuesday to the US House Financial Services Committee. The hearing went on without him. Forbes obtained and published a draft of Bankman-Fried’s prepared testimony for the hearing, in which he said his primary focus was to “do right by the customers of FTX International who were hurt.” 

At Tuesday’s hearing, the new CEO of FTX John Ray spoke instead. He called the FTX collapse “plain, old embezzlement.”

Philip Davis, the Bahamas’ prime minister, said his country is conducting its own criminal and regulatory investigations into FTX’s collapse.