US charges Bankman-Fried for defrauding FTX investors

The US Securities and Exchange Commission (SEC) on Tuesday charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd – the crypto trading platform of which he was the CEO and co-founder.

According to the SEC’s complaint, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 US-based investors since at least May 2019.

It said that Bankman-Fried, “orchestrated a years-long fraud” to conceal from FTX investors the diversion of customer funds to Alameda Research, his crypto trading firm.

“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,” SEC Chair Gary Gensler said in a statement.

Regulators signaled this may be just the first of multiple charges to come. The SEC said there are ongoing investigations into “other securities law violations” and into other entities and individuals.

Bankman-Fried was arrested without incident at his Bahamas apartment complex on Monday, and is set to appear in a Nassau court Tuesday, the Royal Bahamas Police Force said Monday in a statement.

Shortly after his arrest, the SEC said it had authorized separate charges relating to Bankman-Fried’s “violations of securities laws,” which will be filed publicly on Tuesday.

The United States’ extradition treaty with the Bahamas allows US prosecutors to return defendants to American soil if the charges would be considered punishable by imprisonment of at least a year in both jurisdictions.

Bankman-Fried is the 30-year-old crypto celebrity who became a pariah overnight last month as his company suffered a liquidity crisis and filed for bankruptcy, leaving at least a million depositors unable to access their funds.

In the four weeks since FTX filed for bankruptcy, Bankman-Fried has sought to cast himself as a somewhat hapless chief executive who got out over his skis, denying accusations that he defrauded FTX’s customers.

“I didn’t knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”

Meanwhile, the charges could land Bankman-Fried in prison for decades. But before he ever serves time, U.S. prosecutors have to secure an extradition from the Bahamas back to New York.

The U.S. and the Bahamas have had an extradition treaty in place since 1931, with the most recent iteration codified in 1990. Because Bankman-Fried hasn’t been convicted in the Bahamas yet, U.S. prosecutors had to secure an arrest warrant and provide sufficient evidence to the Bahamians that he had committed a crime.

Extradition is the first step in a process that could take years to finish. Given the magnitude of Bankman-Fried’s alleged crimes, prosecutors and regulators will be pursuing concurrent cases around the world.

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