Here is all the things Sam Bankman-Fried is accused of by the US authorities

On Monday night, Bahamian authorities arrested FTX founder and former CEO Sam Bankman-Fried on the request of the US authorities. The next morning, the Securities and Change Fee (SEC), Division of Justice (DOJ) and Commodity Futures Buying and selling Fee (CFTC) filed formal civil and felony costs in opposition to Bankman-Fried in “parallel actions.” It was loads to soak up abruptly, so beneath Engadget has damaged up present costs in opposition to SBF by company, with some further context offered.

These indictments probably signify solely the beginning of Bankman-Fried’s troubles. Along with the fees it introduced on Tuesday, the SEC mentioned it was investigating Bankman-Fried for different securities violations. The company additionally introduced that it’s actively inspecting the actions of different FTX executives and staff. As extra costs are unsealed, Engadget will proceed to replace this text.

Securities and Change Fee

The Securities and Change Fee accused SBF of defrauding FTX traders and prospects of greater than $1.9 billion. Beginning as early as Might 2019 till as lately as this previous November, “Bankman-Fried was orchestrating a large, years-long fraud, diverting billions of {dollars} of the buying and selling platform’s prospects funds for his personal private profit and to assist develop his crypto empire,” the SEC mentioned.

All of the whereas, Bankman-Fried portrayed himself as a accountable enterprise chief constructing a protected buying and selling platform with “refined, automated measures to guard buyer property.” In actuality, the SEC says, “Bankman-Fried orchestrated a fraud to hide the diversion of buyer funds to his privately-held crypto hedge fund, Alameda Analysis.”

Bankman-Fried instructed traders and prospects FTX’s sister firm was simply one other platform on the alternate with no particular privileges to talk of. “These statements have been false and deceptive,” in accordance with the SEC. Alameda had entry to a “just about limitless ‘line of credit score” unknowingly funded by FTX prospects. In Might 2022, when Alameda’s lenders demanded the agency repay loans price billions of {dollars}, Bankman-Fried allegedly directed FTX to divert much more cash to the hedge fund.

The SEC seeks to bar Bankman-Buddy from buying and selling securities sooner or later. The company additionally desires to grab his ill-gotten good points and bar him from performing as an officer or director at one other firm.

Present FTX CEO John Ray III testified earlier than the Home Monetary Companies Committee on Tuesday — SBF had mentioned he would attend the listening to earlier than his arrest. Ray spoke to a few of the allegations detailed by the SEC. “That is actually old school embezzlement,” he instructed the panel. “We have misplaced $8 billion. I do not belief a single piece of paper on this group.”

Division of Justice

Along with civil costs, Bankman-Fried faces a felony indictment from the Justice Division. On Tuesday, prosecutors from the Southern District of New York filed eight costs in opposition to the previous government, together with a number of counts of wire fraud. The Justice Division alleges SBF conspired with different people to defraud traders by sharing deceptive details about FTX and Alameda’s monetary situation. Prosecutors additional accused him of trying to commit commodities and securities fraud. On high of that, Bankman-Fried allegedly broke federal election legal guidelines by donating greater than is legally allowed and within the names of different individuals.

SBF spoke about his political donations in a latest interview with journalist Tiffany Fong. “I donated to each events. I donated about the identical quantity to each events,” he mentioned. “All my Republican donations have been darkish. The rationale was not for regulatory causes, it is as a result of reporters freak the fuck out when you donate to Republicans.”

It is price emphasizing how critical the felony costs in opposition to Bankman-Fried are. For context, a federal decide lately sentenced Theranos founder and former CEO Elizabeth Holmes to 11 years in jail for defrauding the corporate’s traders and sufferers. In the meantime, Ramesh “Sunny” Balwani, the startup’s former chief working officer, was sentenced to almost 13 years in jail for his position within the scheme. Sam Bankman-Fried stands accused of defrauding traders of virtually $2 billion, or about twice what traders misplaced to Theranos.

Commodity Futures Buying and selling Fee

Rounding out the present costs in opposition to Bankman-Fried, the Commodity Futures Buying and selling Fee accused the previous government of utilizing Alameda Analysis to “surreptitiously” siphon buyer funds. “At Bankman-Fried’s course, FTX executives created options within the underlying code for FTX that allowed Alameda to keep up an primarily limitless line of credit score on FTX,” the regulator alleges. It provides that Alameda had different “unfair” benefits, together with an exemption from the platform’s auto-liquidation danger administration course of.

As early as Might 2019, SBF and “a minimum of one” different Alameda government directed the agency to make use of FTX buyer funds to commerce on competing platforms and purchase “high-risk” digital property. Moreover, the CFTC alleges that Bankman-Fried and his cohorts “took a whole bunch of tens of millions of {dollars} in poorly-documented ‘loans’ from Alameda,” which they then used to buy actual property and make political donations.

For his actions, the CFTC is searching for to ban Bankman-Fried from buying and selling derivatives and impose civil penalties in opposition to him. It additionally desires to bar him from performing as a director or officer sooner or later.