SEC Lays Litany of Charges on Sam Bankman-Fried ‘SBF’

In the latest development on the FTX debacle, the US Securities and Exchange Commission (SEC) has charged Sam Bankman-Fried (popularly known by the initial SBF), the founder and ex-CEO of the fallen crypto exchange, “with orchestrating a scheme to defraud equity investors in FTX Trading Ltd.” According to a press release by the SEC, since at least May 2019, FTX raised $1.8 billion from equity investors; FTX also raised approximately $1.1 billion from approximately 90 US-based investors.

The SEC accuses SBF of presenting FTX as a safe, responsible cryptocurrency trading platform, touting FTX's sophisticated, automated risk measures to protect users' funds; but in reality, orchestrating a year-long fraud to conceal the undisclosed diversion of customers' funds to Alameda Research, his privately-held crypto hedge fund, and FTX's trading arm; Sam Bankman-Fried also afforded Alameda Research special treatment on the FTX platform, the SEC alleges.

“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 Chairperson Gary Gensler said. The SEC calls the alleged fraud committed by SBF a clarion call to crypto platforms to come into compliance with the SEC's laws.

“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, 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. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

From the onset of the FTX collapse, Sam Bankan-Fried has maintained his claim of innocence. He rebutted the initial rumors of insolvency at FTX with a series of reassuring tweets, stating that everything was fine at FTX. Most of the tweets are now deleted. In his first live interview two weeks ago at the DealBook Summit, SBF told the New York Times DealBook Summit host Andrew Sorkin that he unknowingly commingled users' funds when asked about Alameda's risky trades funded with FTX users' funds.

Sam Bankman-Fried Arrested in the Bahamas

Authorities have caught up with Sam Bankman-Fried in the Bahamas, the headquarters of his fallen crypto exchange and his supposed residence for the past year. The office of the Attorney General of the Bahamas said in a statement that the arrest followed receipt of formal notification from US authorities that criminal charges have been filed against SBF and there is likely to be an extradition request.

Before the announcement of his arrest, SBF had said he was willing to testify virtually at a U.S. House Financial Services Committee hearing to examine the FTX debacle, to be held today.