The US securities regulator has charged FTX founder Sam Bankman-Fried with orchestrating a scheme to defraud equity investors in the collapsed crypto exchange.
The Securities and Exchange Commission has accused Bankman-Fried of having 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.
SEC Chair Gary Gensler said: "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.
"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. Compliance protects both those who invest on and those who invest in crypto platforms with time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business.”
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: "FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service.
“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent."
The US attorney’s office in New York on Monday said Bankman-Fried was arrested in the Bahamas at the request of the US government.
Mr Bankman-Fried is under criminal investigation by US and Bahamian authorities following the collapse last month of FTX.
The firm filed for bankruptcy on November 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
