The US Securities and Exchange Commission (SEC) has charged disgraced cryptocurrency baron Sam Bankman-Fried with defrauding FTX investors and customers – just hours after he was arrested in The Bahamas.
In a statement on Tuesday morning, the SEC said the 30-year-old “orchestrated a years-long fraud” at FTX where he diverted customer funds to Alameda Research – a private hedge fund which he also owed – and kept it hidden from investors.
The former CEO of the bankrupt cryptocurrency exchange FTX raised more than $1.8bn from equity investors since its May 2019 launch and used the funds to make undisclosed investments, such as in “lavish real estate purchases” and political donations, the SEC said.
The regulator described Mr Bankman-Fried’s actions as “a house of cards” and added that it would seek an injunction to prevent him from future securities trading.
“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,” said SEC Chair Gary Gensler in a statement.
Separate charges against the crypto baron are also expected to be announced by the US Attorney’s Office for the Southern District for New York and the Commodity Futures Trading Commission later on Tuesday.
News of Tuesday’s charges comes less than a day after he was arrested by local authorities in The Bahamas on behalf of the US government.
Prosecutors in New York announced on Monday night that Mr Bankman-Fried had been taken into custody by local authorities on the basis of a sealed indictment from their office.
The attorney general of The Bahamas confirmed the arrest in a letter, saying officials were expecting a US extradition request and would consider it in accordance with Bahamian law.
Fortune had reported last week that US prosecutors were mulling fraud charges against Mr Bankman-Fried and were examining the financial transfers he made as FTX tipped into insolvency.
Tuesday’s announcement from the SEC arrives on the same day that Mr Bankman-Fried had been set to testify voluntarily before Congress about the collapse of his crypto exchange.
Though he’d originally missed the deadline to RSVP to the US House Committee on Financial Services, Mr Bankman-Fried tweeted last week that he was “willing to testify” at the 13 December hearing, but would be doing so remotely from his base in The Bahamas.
“I still do not have access to much of my data – professional or personal. So there is a limit to what I will be able to say, and I won’t be as helpful as I’d like,” he said.
“But as the committee still thinks it would be useful, I am willing to testify on the 13th.”
Mr Bankman-Fried’s arrest comes after six weeks of financial chaos that took down the world’s third-largest cryptocurrency exchange and humbled the colourful 30-year-old founder, commonly known as SBF.
The fallout began last month when the publication of a balance sheet prompted users to flood the platform to withdraw around $5bn worth of crypto assets in a single day.
Experts in the field have speculated during interviews with CNBC that if federal prosecutors pursue wire or bank fraud against Mr Bankman-Fried he could face life in prison without the possibility of supervised release.
For his part, the 30-year-old has maintained that he didn’t “knowingly” misuse customers’ money and said he believes they will eventually be made whole again, according to The New York Times.
“I didn’t ever want to commit fraud on anyone. I was shocked at what happened this month,” Mr Bankman-Fried said.
