May 28, 2023

Breaking News

information on the top stories, weather, business, entertainment, politics, movies, entertainment

The founder of FTX “orchestrated years of fraud.” According to the SEC

The founder of FTX “orchestrated years of fraud.” According to the SEC

The founder of FTX “orchestrated years of fraud.” According to the SEC

On Tuesday, the Securities and Exchange Commission charged Sam Bankman-Fried with defrauding investors and customers through his failed cryptocurrency exchange FTX.

According to the SEC, Bankman-Fried “orchestrated a years-long fraud” to conceal from FTX investors the diversion of customer funds to his crypto trading firm, Alameda Research.

“We allege that Sam Bankman-Fried built a house of cards on deception while telling investors it was one of the safest buildings in crypto,” SEC Chair Gary Gensler said in a statement.

Regulators hinted that this could be the first of many charges. The SEC stated that investigations into “other securities law violations” as well as other entities and individuals are ongoing. Another regulator, the Commodity Futures Trading Commission, is also charging Bankman-Fried, according to the agency.

The lawyer for Bankman-Fried was not immediately available for comment.

Bankman-Fried, known as “SBF,” is a 30-year-old crypto celebrity who became a pariah overnight last month when his company experienced a liquidity crisis and declared bankruptcy, leaving at least a million depositors unable to access their funds. He was arrested without incident at his Bahamas apartment complex shortly after 6 p.m. ET Monday and is scheduled to appear in a Nassau court on Tuesday, according to a statement issued by the Royal Bahamas Police Force.

Ad Reactions
Risky wagers, extravagant spending
Since its inception in May 2019, FTX has raised more than $1.8 billion in funding, including from sophisticated investors such as BlackRock, Sequoia Capital, and the Ontario Teachers’ Pension Plan. Star athletes and celebrities who backed FTX, including Tom Brady and Gisele, reportedly received stock in the company.

The SEC claims that Bankman-Fried, 30, defrauded those who backed FTX by portraying it as a “safe, responsible” crypto trading firm that used “sophisticated, automated” risk management to protect customer funds.

According to the complaint, Bankman-Fried secretly diverted FTX customer funds to effectively provide Alameda with a “unlimited ‘line of credit.'” According to the SEC, Bankman-Fried also concealed from investors the risk associated with FTX’s exposure to significant holdings of overvalued, illiquid assets such as FTX-related tokens.

Bankman-Fried did not simply invest FTX customer funds in his hedge fund. The SEC claims he used the funds to make undisclosed venture investments, “opulent” real estate purchases, and large political contributions.

“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service,” said Gurbir Grewal, director of the SEC’s division of enforcement, in a statement. “However, as we allege in our complaint, that veneer was not only thin, but also fraudulent.”

‘I messed up.’
In the four weeks since FTX declared bankruptcy, Bankman-Fried has attempted to portray himself as a somewhat hapless CEO who got out on his skis, denying allegations that he defrauded FTX’s customers.

“I didn’t do it knowingly,” he told the BBC over the weekend. “I didn’t intend for any of this to happen. I was clearly not as capable as I thought I was.”

Bankman-Fried, on the other hand, has previously admitted to making mistakes while leading FTX, from which he stepped down last month after it declared bankruptcy.

“Look, I screwed up,” Bankman-Fried admitted during a virtual visit to the New York Times’ DealBook Summit. “There are some things I would do over again.”