FTX founder Sam Bankman-Friend was arrested Monday in the Bahamas and charged with defrauding investors, The New York Times reports.
The Securities and Exchange Commission charged SBF with misleading major investors, who committed nearly $2 billion to FTX, about the health of the failed crypto exchange and its sister crypto trading platform Alameda Research, according to the report.
The SEC alleged that SBF misled customers by taking billions of dollars to trade crypto and telling them it was safe. The SEC alleges that the money was transferred to Alameda which used it to fund outside investments, buy real estate and make political contributions.
“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 Chairman Gary Gensler said in a statement.
Federal probe:
Federal prosecutors in Manhattan are also expected to unseal a criminal indictment against Bankman-Fried on Tuesday.
SBF is expected to be charged with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.
“From the start, Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund,” the SEC said in its civil complaint, “and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
Testimony:
SBF was scheduled to testify before the House Financial Services Committee on Tuesday before he was arrested.
A leaked prepared opening statement shows that he planned to tell lawmakers, “I fucked up.”
“Last year, my net worth was valued at $20 billion,” he was prepared to say. “Last I saw, I believe my bank account had about $100K in it,” he added.
Much of the testimony was set to blame others for the implosion, including new FTX CEO John Ray, Binance, the company’s bankruptcy lawyer, the company’s general counsel, and a “historical accounting quirk” at the company’s internal dashboard.
“I now believe that Alameda’s position was over twice as large as what was displayed,” his prepared remarks state. “My periodic assessments of the riskiness of our positions were often based on the dashboard’s numbers.”
