Sam Bankman-Fried Led ‘Years-Long Fraud’ at FTX, SEC Says

FTX founder Sam Bankman-Fried was arrested Monday.

Photo:

saul loeb/Agence France-Presse/Getty Images

Updated Dec. 13, 2022 7:09 am ET

FTX founder

Sam Bankman-Fried

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

Gary Gensler

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.

Sam Bankman-Fried was arrested in the Bahamas on Monday, a day before he was expected to testify on the sudden collapse of FTX before the House Committee on Financial Services. WSJ’s Alexander Saeedy explains what to expect during the hearing. Illustration: Jacob Reynolds

Write to Dave Michaels at dave.michaels@wsj.com

Source link