The former CEO of failed cryptocurrency firm FTX, Sam Bankman-Fried has been charged with defrauding FTX investors, and diverting funds to its investment arm -Alameda research. He was arrested Monday in the Bahamas, where he has been living, after the U.S. filed criminal charges.
In the complaint, the U.S. Securities and Exchange Commission alleges that Bankman-Fried orchestrated a years-long fraud by diverting investors’ funds to his private hedge fund and using them to make venture investments, lavish real estate purchases and large political donations.
Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.
That all unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet. Customers moved to withdraw billions of dollars, but FTX could not meet all the requests because it apparently used its customers deposits to cover bad bets at Bankman-Fried’s investment arm, Alameda Research.
Bankman-Fried said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
The House Financial Services Committee is still expected to hear testimony Tuesday from current CEO John Ray III. Ray, who took over FTX on Nov. 11 and is a long-time restructuring specialist, has said in court filings that the financial conditions at FTX were worse than at Enron.
Bahamian authorities plan to continue their own investigation into Bankman-Fried.
“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,” said Bahamian Prime Minister Philip Davis, in a statement.
The U.S. Securities and Exchange Commission said it had authorized separate charges related to alleged violations of securities laws and would file them publicly Tuesday.
Since its collapse, FTX’s new management has called the cryptocurrency exchange’s management a “complete failure of corporate controls.”
Many have accused Bankman-Fried of being a Democrat party ally, funneling tens of millions of dollars to Democrat candidates, however, in an interview Bankman-Fried said he gave to Republicans as well, he just had to hide it because of the liberal media,
“I donated to both parties. I donated about the same amount to both parties. All my Republican donations were dark,” he said, referring to political donations that are not publicly disclosed. “The reason was not for regulatory reasons, it’s because reporters freak the fuck out if you donate to Republicans. They’re all super liberal, and I didn’t want to have that fight.”
