US Attorney Says ‘We’re Not Done’ Suing Individuals for FTX Collapse ExamPaper

Multiple U.S. government agencies held a press conference on Tuesday afternoon about the charges against former FTX CEO Sam Bankman-Fried.

When asked if the entities will bring charges against other individuals allegedly involved in the collapse of the FTX, Damian Williams, the U.S. Attorney for the Southern District of New York, said at the event: “All I can say is this: it is clear that we are not done yet.”

The meeting came hours after the US law firm, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) all filed charges against Bankman-Fried earlier in the day.

This became apparent after Bankman-Fried was arrested in the Bahamas on Monday evening. The SEC has charged Bankman-Fried for an alleged “year-long scheme to defraud investors of FTX,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said at the conference. Bankman-Fried is under investigation for other securities violations. The US law firm and the CFTC filed charges against him in “parallel actions.”

Williams declined to comment on which FTX-related individuals have cooperated with the investigations so far, but reiterated the importance for those who haven’t to “get this done quickly.”

“As alleged in our complaint, from 2019 through November 2022, Bankman-Fried raised more than $1.8 billion from equity investors based on lies,” Grewal said. “FTX operated behind a layer of legitimacy that Bankman-Fried, among others, had created…but as we allege in our complaint, that layer was not only thin, it was also fraudulent.”

Grewal said Bankman-Fried had been secretly diverting client funds into its crypto hedge fund, Alameda Research, since FTX was founded in 2019. “As alleged in our complaint, he then misused those funds to make undisclosed risk investments, make lavish real estate purchases and make large political donations.”

When asked at the conference if FTX’s demise is related to what happened with the Bernie Madoff Ponzi scheme, Williams said, “It’s hard to compare these things, but this is one of the biggest financial frauds in the world. American history.”

Grewal added that Bankman-Fried’s previous statements that the crypto exchange operated with “sophisticated risk controls and other client protections” were “simply bogus.”

“He often claimed that Alameda was just another customer with no special privileges,” Grewal said. “[But] he offered Alameda a virtually unlimited line of credit funded by FTX customers and he also diverted billions of dollars in customer funds from FTX to Alameda.

Grewal’s conclusion surrounding the collapse of the FTX was simple: non-compliant trading platforms pose dramatic risks to investors and clients alike. “Among other things, they don’t provide them with the same robust level of disclosures and protection against fraud and conflicts of interest. That is what traditional US registered exchanges provide, so it is imperative that non-compliant platforms comply.”

“The runway is getting shorter for them to come in and register with us,” Grewal said. “For those who do not, the Enforcement Department is ready to take action.”

In separate news, the US House Committee on Financial Services held a hearing on FTX’s collapse Tuesday morning. The four-hour hearing covered a lot of ground and left many questions unanswered, but several parts stood out from the testimony of new FTX CEO John J. Ray III, which you can read about in detail here.

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