diverted customer funds from the start of his cryptocurrency exchange to support his hedge fund, Alameda Research, and to make venture investments, real-estate purchases and political donations, the Securities and Exchange Commission alleged in a lawsuit filed Tuesday.
The SEC said those moves were concealed from investors who poured $1.8 billion into FTX. U.S. investors contributed $1.1 billion of that total. Mr. Bankman-Fried also failed to disclose special treatment that FTX gave to Alameda on its platform, and financial risks posed by the relationship between the exchange and the hedge fund, the SEC alleged.
“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
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.”
Mr. Bankman-Fried was arrested on Monday in the Bahamas after the U.S. filed criminal charges against him, the authorities in the two countries said. The Commodity Futures Trading Commission also sued the FTX founder, according to the SEC’s press release.
Please return for updates as this news develops.
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