Sam Bankman-Fried, the former CEO of cryptocurrency giant FTX, defrauded investors by funneling money into his private hedge fund, according to a filing on Tuesday by the U.S. Securities and Exchange Commission.
The SEC charges were filed in the Southern District of New York one day after Bankman-Fried, the once-celebrated founder and CEO of FTX, was arrested in the Bahamas, and are separate from criminal charges the U.S. intends to pursue.
The SEC said in a press release that Bankmen-Fried raised more than $1.8 million from equity investors since he founded FTX in May 2019, based in the Bahamas, and he allegedly “orchestrated a yearslong fraud to conceal” the undisclosed diversion of FTX customers’ funds to his privately-held crypto hedge fund Alameda Research LLC.
He also allowed the undisclosed special treatment to Alameda on the platform, including a “virtually unlimited line of credit” funded by the platform’s customers and exempted Alameda from certain key FTC risk mitigation measures, the SEC said.
He then allegedly used FTX customers’ funds at Alameda “to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
“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.
This is a developing story. Please check back for updates.