Feds Unseal Indictment Accusing SBF of One of the Biggest Financial Frauds in History
New York federal prosecutors unsealed an indictment against fallen crypto king and FTX founder Sam Bankman-Fried on Tuesday, outlining what they allege was “one of the biggest financial frauds in American history.”
The eight-count indictment included charges of wire fraud, conspiracy to commit money laundering, and conspiracy to commit securities fraud.
It also accused Bankman-Fried of using the names of other people to make tens of millions of dollars in illegal campaign contributions to both Democrats and Republicans, U.S. Attorney for Southern District of New York Damian Williams said at a press conference.
Those donations were “disguised to look like they were coming from wealthy co-conspirators when, in fact, the contributions were funded by Alameda Research with stolen customer money,” he said.
“All of this dirty money was used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington,” he said.
Williams urged anyone who received donations to work with the feds to return the money. He also indicated that others may be charged in the sweeping investigation, urging anyone who worked with Bankman-Fried to come forward “before we come to you.”
The U.S. Securities and Exchange Commission separately announced fraud charges against the former billionaire over violations of securities laws.
“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,” Gary Genseler, chair of the SEC, wrote in a statement announcing the charges.
Meanwhile, the Commodity Futures Trading Commission filed a suit on Tuesday accusing Bankman-Fried and his firms of fraudulent behavior. “FTX executives created features in the underlying code for FTX that allowed Alameda [Research, Bankman-Fried’s crypto hedge fund], to maintain an essentially unlimited line of credit on FTX,” the commission wrote in a filing on Tuesday.
Incredulous New CEO Says FTX Used QuickBooks to Manage Billions
Bankman-Fried had been expected to appear before the House Committee on Financial Services on Tuesday, where he would have been grilled under oath for the first time since FTX’s implosion.
His sudden arrest even caught committee chair Maxine Waters off guard.
“Although Mr. Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr. Bankman-Fried about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many,” the Democratic congresswoman said in a statement. “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity.”
Bankman-Fried had planned to begin his testimony by declaring that he was “formally stating, under oath” that he “fucked up,” according to a draft of his comments obtained by Forbes.
“Last year, my net worth was valued at $20 [billion],” he would have said. “Last I saw, I believe my bank account had about $100K in it.”
Amazingly, Bankman-Fried had declared earlier on Monday, “I don’t think I will be arrested,” saying he was more worried about paparazzi.
Investigators have been probing FTX’s financial practices, including whether the firm improperly diverted customers’ assets to Alameda Research.
The Justice Department’s indictment alleged that Bankman-Fried “agreed with others to defraud customers of FTX.com by misappropriating customers’ deposits and using those deposits to pay expenses and debts of Alameda.” The language suggests that other parties may face charges over the collapse.
There are also outstanding questions about massive loans FTX made to executives, and whether there were safeguards in place to prevent conflicts of interest. The firm’s new chief executive, John J. Ray III, blasted his predecessors in a bankruptcy filing last month.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he wrote.
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