SEC charges Samuel Bankman-Fried with defrauding investors in FTX

The Securities and Exchange Commission charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading, the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing. The agency said, "According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8B from equity investors, including approximately $1.1B from approximately 90 U.S.-based investors. In his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX’s sophisticated, automated risk measures to protect customer assets. The complaint alleges that, in reality, Bankman-Fried orchestrated a years-long fraud to conceal from FTX’s investors the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund; the undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited "line of credit" funded by the platform’s customers and exempting Alameda from certain key FTX risk mitigation measures; and undisclosed risk stemming from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens. The complaint further alleges that Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations." The SEC’s complaint seeks injunctions against future securities law violations; an injunction that prohibits Bankman-Fried from participating in the issuance, purchase, offer, or sale of any securities, except for his own personal account; disgorgement of his ill-gotten gains; a civil penalty; and an officer and director bar. In parallel actions, the U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission announced charges against Bankman-Fried. Publicly traded companies in the crypto space include Bit Digital (BTBT), Coinbase (COIN), Core Scientific (CORZ), Greenidge Generation (GREE), Marathon Digital (MARA), MicroStrategy (MSTR), Riot Blockchain (RIOT), Stronghold Digital Mining (SDIG) and TeraWulf (WULF). Reference Link