First published: 12:49AM EST
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The U.S. Securities and Exchange Commission (SEC) filed charges against Sam Bankman-Fried on Tuesday.
The SEC’s complaint stated, “Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”
Furthermore, the SEC filing pointed out that while FTX’s customers believed their assets were safe on the FTX platform, “Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC (“Alameda”), and then used those customer funds to make undisclosed venture investments, lavish real estate purchases,
and large political donations.”
Bankrupt crypto exchange FTX’s founder and CEO, Sam Bankman-Fried, was arrested by the Royal Bahamas Police Force on suspicion of criminal charges filed by the U.S. However, it remains to be seen whether his arrest will lead to customers getting back their lost money. Bankman Fried had shifted base to Nassau, the Bahamas, shortly after FTX’s fallout and has been sheltering there ever since.
The young crypto magnate has been indicted on several charges, including wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering, a WSJ report stated, citing people familiar with the matter.
Bankman-Fried will appear before the Magistrate Court in Nassau today, where the sealed indictment will be opened. Both the U.S. and the Bahamas share common financial offenses against the law. The Bahamian Prime Minister Philip Davis said, “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.”
Bankman-Fried was scheduled to testify before Congress today to investigate the failure of FTX. With his arrest, that may not be possible, although the newly appointed CEO of FTX, John Ray III, may appear for the hearing.
On several occasions, Ray has blamed the inexperienced and unqualified management at FTX for its collapse, as well as a lack of proper internal controls to safeguard customers’ money. Bankman-Fried has denied the intentional commingling of customers’ custody accounts with those used for making risky bets outside the firm. And now, billions of dollars of customers’ money are “missing.”
FTX Collapse has Fumbled the Crypto Market
The value of digital assets crumbled with the rising interest rates in 2022, which has been the crux of the collapse of several crypto firms. The collapse of FTX has sent shockwaves through the crypto world, which may be difficult to surpass anytime soon. Individuals and businesses alike have lost faith in the system, and several have returned to the traditional, regulated world of securities.
The price of Bitcoin (BTC-USD), one of the most traded cryptocurrencies, has plunged nearly 76% from its all-time high marked in November last year. After falling to its all-time low following the FTX bankruptcy, Bitcoin is gaining strength and has been hovering around $17,000 lately.
