‘One of the biggest frauds in American history’: FTX’s founder faces criminal charges
A federal court unsealed an indictment Tuesday against disgraced FTX founder Samuel Bankman-Fried — accusing him of a slew of financial crimes including fraud, money laundering and violating campaign finance laws.
The indictment says the 30-year-old crypto magnate swindled FTX customers starting in 2019 by using their multibillion-dollar deposits to pay for expenses and debts of Alameda Research, a crypto hedge fund he owns, and to make investments.
According to the indictment, he fleeced Alameda lenders as well by providing false and misleading information regarding FTX’s financial condition and the source of the money being used to pay the company’s debts.
Damian Williams, U.S. Attorney for the Southern District of New York, said at a press conference Tuesday that this is “one of the biggest frauds in American history.”
Bankman-Fried also violated campaign finance laws by conspiring to make tens of millions of dollars in corporate contributions that were disguised to look like they were coming from wealthy people ahead of the 2022 midterm elections, the indictment reveals.
Williams added that Bankman-Fried and his co-conspirators donated to candidates and committees associated with Democrats and Republicans using “stolen customer money.” Additionally, he encouraged elected officials and others to work with his office to return the funds to the victims.
“All of this dirty money was used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington,” Williams said.
Bankman-Fried’s lawyer, Mark Cohen, said in a statement that he’s reviewing the charges with his team and considering all legal options.
Bankman-Fried was arrested Monday in the Bahamas after a Manhattan grand jury indicted him Dec. 9 — paving the way for his extradition back to the U.S.
SEC charges Bankman-Fried with defrauding FTX investors
On Tuesday, the Securities and Exchange Commission also charged Bankman-Fried with orchestrating a scheme to defraud equity investors at FTX.
According to the SEC’s complaint, Bankman-Fried promoted the $32 billion company as a safe and responsible crypto asset trading platform, raising more than $1.8 billion from equity investors, including about $1.1 billion from approximately 90 U.S.-based investors. In reality, the SEC says, he led a years-long fraud to conceal financial risks from FTX’s investors.
The SEC complaint also says that Bankman-Fried used FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases and large political donations.
“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 Chair Gary Gensler said Tuesday in a news release. “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.”
Miami-Dade takes FTX to court
FTX, based in the Bahamas before its collapse into bankruptcy last month, owes Miami-Dade a $5.5 million payment in January as part of its sponsorship deal for the county’s basketball arena — but its finances are a shambles, according to court filings.
READ MORE: Miami’s star turn in the crypto boom now has an iconic bust: the Heat’s FTX Arena
Miami-Dade asked a judge on Nov. 22 to allow the county to break the 19-year, $130 million naming-rights agreement with FTX for the Miami Heat arena, warning of “significant hardship” if forced to remain associated with the failed crypto company and its scandalous corporate behavior.
READ MORE: FTX scandal brings ‘hardship’ from Miami Heat arena deal. County asks judge to help
Before his announced arrest, Bankman-Fried was expected to testify virtually before the House Financial Services Committee on Tuesday, but his attorneys told CNBC that he will not testify.
Miami Herald staff writers Doug Hanks and Jacqueline Charles contributed to this report.
This story was originally published December 12, 2022 at 8:37 PM.
