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‘House of cards on foundation of deception’: SEC charges shamed Sam Bankman-Fried with defrauding FTX equity investors out of $1.8BILLION by diverting funds to privately-held crypto hedge fund

  • SEC said it would seek an injuction to prevent SBF from future securities trading
  • Statement added separate charges would be announced by other bodies today
  • News comes the day after SBF was arrested by local police in the Bahamas

The Securities and Exchange Commission has charged Sam Bankman-Fried with defrauding FTX equity investors out of $1.8 billion, in what regulators called ‘a house of cards on a foundation of deception’.

The shamed entrepreneur and founder of cryptocurrency exchange FTX is accused of diverting funds to a privately-owned crypto hedge fund.

In a statement, the SEC said it would seek an injunction to prevent Bankman-Fried from future securities trading except for his personal account and a civil penalty, among other actions. Separate charges would be announced by the U.S. Attorney’s Office for the Southern District for New York and the Commodity Futures Trading Commission later on Tuesday, the SEC said.

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The news comes the day after he was arrested by local police in the Bahamas, acting on behalf of the U.S. Earlier, it was reported that American officials are ‘likely to request his extradition’ from the Caribbean, where he has been hiding since his $32 billion empire came crashing down last month.

The Securities and Exchange Commission has charged Sam Bankman-Fried (pictured) with defrauding FTX equity investors out of $1.8 billion

The Securities and Exchange Commission has charged Sam Bankman-Fried (pictured) with defrauding FTX equity investors out of $1.8 billion

‘Today we are holding Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from investors in FTX and misusing funds belonging to FTX’s trading customers,’ the exchange said in a statement on Tuesday. 

SEC Chair Gary Gensler said: ‘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.

‘The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.’

The statement added investigations ‘as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.’ 

News of the charges marks the latest twist since the rapid collapse of SBF’s digital currency exchange, that was until recently worth tens of billions of dollars.

Just hours before his arrest on Monday, Bankman-Fried shrugged off the threat of being detained by American authorities.

He spoke to interviewers with the Unusual Whale platform, who quizzed him on a range of topics, including his plans to testify remotely before Congress on Tuesday.

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He said it was the threat of paparazzi and a busy diary that was keeping him away, not the fear of being arrested on U.S. soil.

‘I don’t believe I would be but I haven’t done a deep dive into that,’ he replied, confidence giving way to hesitation. 

‘At some point it’s something I have to think harder about.’ 

Bankman-Fried’s FTX platform was plugged by celebrities in advertising campaigns, and the cyber whiz kid became a regular presence in Washington, where he donated tens of millions of dollars in political contributions.

But after reaching a valuation of $32 billion, FTX’s implosion was swift following a November 2 report on ties between FTX and Alameda, a trading company also controlled by Bankman-Fried.

The report exposed that Alameda’s balance sheet was heavily built on the FTT currency – a token created by FTX with no independent value.

This is a breaking news story. More to follow… 

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