SEC, CFTC and SDNY Lawyers Office Accuses FTX’s Sam Bankman-Fried of Defrauding Investors

The U.S. Securities and Exchange Commission (SEC) has formally charged disgraced FTX founder Sam Bankman-Fried (aka SBF) with defrauding investors, it revealed Tuesday morning after he was arrested in Bahamas. The SEC said in a press release that in addition to being charged with fraud involving FTX stock investors, he was also being investigated for other securities law violations — and has noted that there were also ongoing investigations against others involved.

However, the SEC isn’t the only one getting its hands on this ball: The Southern District of New York Attorney’s Office and the Commodity Futures Trading Commission (CFTC) have also filed charges against SBF under ” parallel actions”.

The US securities regulator’s complaint alleges that while Bankman-Fried touted FTX as “a safe and responsible crypto-asset trading platform”, in reality the founder sometimes described as the “white knight of crypto” was engaged in a “years-long fraud” designed to hide from FTX investors the fact that their funds were being redirected to SBF’s Alameda crypto hedge fund, while Alameda enjoyed a sort of privileged status that shielded it from measures standard risk mitigation methods employed by FTX. The SEC also takes issue with FTX’s degree of exposure to Alameda’s very large holdings of “illiquid assets such as FTX-affiliated tokens.”

The complaint also includes allegations that FTX client funds were used through Alameda for other expenses, including venture capital investments, “lavish real estate purchases,” and political donations, all of which have been documented in numerous numerous reports and, in some cases, by SBF. confession during his numerous interviews following the collapse of his businesses.

SEC Chairman Gary Gensler reiterated his oft-repeated position that, in fact, crypto trading platforms must comply with existing securities laws in a quote from the statement announcing the charges. This is probably the most impactful and meaningful test of this position to date, since SBF’s specific charges in this action are allegations of violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. A consequence if SBF is condemned could be that it is prohibited from trading in securities in the future beyond its capacity as a natural person and prevented from acting as a corporate officer or member of the board of directors, in addition monetary penalties.

This story develops…