Sam Bankman-Fried is now facing some very serious legal challenges, both civil and criminal. Small inventory.
Earlier this week, Bahamas authorities arrested Sam Bankman-Fried (SBF), founder and former FTX CEO, at the request of the US government. Shortly thereafter, the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), and the Commodity Futures Trading Commission (CFTC) filed formal civil and criminal lawsuits against the SBF in “parallel actions.”Below are all the charges currently being filed against Sam Bankman-Freed.
These allegations are likely just the beginning of the billionaire’s troubles. On top of all this, the SEC announced that it was investigating the SBF for other security breaches. The agency also said it is looking into the actions of other FTX executives and employees.
Security and Exchange Commission
The SEC accuses the SBF of defrauding FTX investors and customers of more than $1.9 billion. Between May 2019 and November 2022, “Bankman-Freed orchestrated a massive fraud, embezzling billions of dollars in trading platform client funds for personal gain and to help grow his crypto empire,” the SEC said. “Bankman-Fried set up a scam to hide the reallocation of client funds to his own crypto fund Alameda Research.”
SBF told investors and clients that the FTX subsidiary is just another exchange with no special perks. “These statements were false and misleading,”the SEC notes. Alameda had access to a “virtually unlimited line of credit”created by uninformed FTX customers.”In May 2022, as Alameda’s creditors demanded the repayment of multi-billion dollar loans, SBF stole even more money from FTX.
The SEC wants to ban Sam Bankman-Fried from any future trading activities. The agency also wants to confiscate all of his ill-gotten gains and ban him from being the CEO or CEO of another company.
Department of Justice
In addition to civil charges, Sam Bankman-Fried faces criminal charges from the Department of Justice. The U.S. Attorney’s Office for the Southern District of New York filed eight complaints, including several for wire fraud. The Justice Department accuses SBF of colluding with others to mislead investors by providing false information about the financial terms of FTX and Alameda. Sam Bankman-Fried also allegedly violated several federal election laws by donating more than allowed and on behalf of others. The SBF defended itself by claiming that it “paid the same amounts to both parties”.
These criminal charges are very serious. By comparison, a federal judge recently sentenced Theranos founder and former CEO Elizabeth Holmes to 11 years in prison for defrauding the company’s investors and patients. Ramesh “Sunny”Balwani, the startup’s former chief operating officer, has been sentenced to 13 years in prison. Sam Bankman-Fried is accused of misleading investors for more than $2 billion, roughly double the amount investors lost in Theranos.
Commodity Futures Trading Commission
The CFTC accuses a former executive of using Alameda Research to secretly steal client funds. “Under the leadership of Sam Bankman-Fried, FTX leaders created the core FTX functionality that allows Alameda to maintain a critical FTX unlimited line of credit,” explains the CFTC. He added that Alameda offers “unfair”benefits, including an exemption from the platform’s chargeback risk management process.
In May 2019, SBF and “at least one”Alameda executive used the company to use FTX client funds to trade on competing platforms and purchase high-risk digital assets. In addition, the CFTC accuses Sam Bankman-Fried and his associates of “receiving hundreds of millions of dollars in minimally documented ‘loans’ from Alameda, funds that were then used to purchase real estate and political donations.”
For his actions, the CFTC wants to ban Sam Bankman-Fried from conducting any trading operations and impose civil sanctions on him. She also wants to prevent him from becoming CEO or CEO in the future.