Founder of crypto exchange FTX faces charges from multiple U.S. agencies

NEW YORK, Dec. 13 (Xinhua) -- Multiple U.S. agencies have filed charges against Sam Bankman-Fried, founder and former chief executive officer of cryptocurrency derivatives exchange FTX, which went into bankruptcy in November 2022.

The U.S. Securities and Exchange Commission (SEC) on Tuesday charged Bankman-Fried with defrauding investors and customers in crypto asset trading platform FTX Trading Limited, the SEC said in a press release.

"Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform's customer funds for his own personal benefit and to help grow his crypto empire," said a complaint by the SEC.

Bankman-Fried, born in 1992 in California, improperly diverted customer assets to his privately-held crypto hedge fund Alameda Research LLC and then used the customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations, the complaint said.

Though FTX had risk measures to protect customer assets, Bankman-Fried exempted Alameda from the risk mitigation measures and provided Alameda with significant special treatment on the FTX platform, including a virtually unlimited "line of credit" funded by the platform's customers, according to the complaint.

Bankman-Fried also misled investors in the months ahead of FTX's bankruptcy so as to raise more money, according to the SEC.

The SEC seeks to permanently enjoin Bankman-Fried from engaging in similar activities, order the defamed founder of FTX to disgorge his ill-gotten gains, impose civil money penalties and an officer and director bar on Bankman-Fried and prohibit him from participating in the offer or sales of securities including crypto asset securities.

Bahamian authorities arrested Bankman-Fried on Monday at the request of the U.S. government, based on a sealed indictment filed by the U.S. Attorney's Office for the South District of New York (SDNY), said SDNY on its social media account.

U.S. federal prosecutors filed criminal charges against Bankman-Fried with eight counts including wire fraud on customers and lenders, and various conspiracy counts including conspiring to defraud the United States and violate campaign finance laws, according to the indictment unsealed Tuesday morning.

The Commodity Futures Trading Commission also filed charges on Tuesday against Bankman-Fried for violations of federal commodities laws.

Bankman-Fried planned to testify at a hearing by the U.S. House Committee on Financial Services virtually on Tuesday.

Headquartered in the Bahamas, FTX once had a valuation of 32 billion U.S. dollars and suffered a liquidity squeeze after it was revealed that the exchange had a shortfall of around 8 billion dollars resulting from the misuse of client funds and losses in its trading arm Alameda Research Limited.

FTX's announcement for Chapter 11 bankruptcy in a U.S. court on Nov. 11 sent shockwaves across the crypto space and financial markets and triggered governmental probes.