SEC, CFTC, and SDNY law firm accuse FTX’s Sam Bankman-Fried of investor defrauding – ExamPaper

The U.S. Securities and Exchange Commission (SEC) has officially charged disgraced FTX founder Sam Bankman-Fried (aka SBF) with defrauding investors, it revealed Tuesday morning after his arrest in the Bahamas. The SEC said in a press release that in addition to being charged with fraud involving equity investors in FTX, it is also under investigation regarding other securities law violations — noting that investigations are ongoing against other individuals involved.

The SEC isn’t alone in getting its hands on this ball, though: Both the Southern District of the New York Attorney’s Office and the Commodity Futures Trading Commission (CFTC) also filed charges against SBF in “parallel actions.”

The U.S. securities regulator’s complaint alleges that while Bankman-Fried presented FTX as “a secure, responsible crypto asset trading platform,” in reality its founder, sometimes described as “crypto’s white knight,” was involved in a “years-long fraud” designed to FTX investors were hiding the fact that their money was being diverted to SBF’s Alameda crypto hedge fund, while Alameda enjoyed a sort of preferential status that shielded it from the usual risk mitigation measures FTX used. The SEC also objects to the level of exposure FTX had to Alameda’s very large holdings of “illiquid assets such as FTX-affiliated tokens.”

The complaint also includes allegations that FTX client funds through Alameda were used for other expenses, including VC investments, “lavish real estate purchases” and political donations, all of which are documented in numerous reports and in some cases by SBF’s own admission during its many interviews after the collapse of his companies.

SEC Chairman Gary Gensler reiterated his oft-repeated position that crypto trading platforms must, in fact, comply with existing securities laws in a quote in the press release announcing the charges. This is probably the most impactful and significant test of that position to date, as SBF’s specific allegations in this action are allegations of violation of the Securities Act of 1933 and the Securities Exchange Act of 1934. A consequence if SBF is convicted, could be that he is prohibited from trading securities in the future beyond as an individual, and may not act as a corporate officer or board member, in addition to monetary fines.

This story develops…

Leave a Comment