Charges made public yesterday by regulators and prosecutors against Sam Bankman-Fried reveal that the founder of FTX allegedly used customer deposits to make venture investments—leaving the fate of those stakes an open question as bankruptcy lawyers try to salvage the remains from the global crypto exchange and make customers whole.
The Securities and Exchange Commission, which charged SBF with defrauding FTX investors Tuesday morning, not long after he was arrested in the Bahamas, alleged that SBF had used customer funds for “lavish real estate purchases” and “large political donations”—but also for some of the venture investments made in crypto startups (the CFTC has accused SBF and FTX entities of fraud and making material misrepresentations and the Southern District of New York charged him with eight counts of fraud). The SEC complaint alleges that SBF specifically made two $100 million investments through FTX’s affiliated VC arm, FTX Ventures, using customer funds that had been diverted to Alameda Research. John Ray III, the bankruptcy attorney who swooped in last month to oversee the liquidation process, echoed some of these allegations in yesterday’s House Committee on Financial Services meeting when he said that an ongoing investigation indicated that investments made from FTX Ventures, “were most likely made with either Alameda money or money that originally came from FTX.com.”
