The Securities and Exchange Commission on Tuesday charged Samuel Bankman-Fried with committing fraud after raising $1.8 billion from investors, as the U.S. government hammer came down on the founder and head of bankrupt cryptocurrency company FTX Trading Ltd.
The move came just hours after Bankman-Fried was arrested in the Bahamas, following charges from the U.S. Justice Department.
Bankman-Fried, commonly known as SBF, lives in the Bahamas, where the cryptocurrency exchange was also based.
“SBF’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition,” said a statement from the Bahamian Attorney General.
The SEC is seeking to bar Bankman-Fried from the securities industry, and will seek a civil fine and an officer and director bar.
SBF was expected to testify remotely in front of a House Financial Services Committee panel on Tuesday. He was called to appear before the criminal charges were announced.
The SEC said Bankman-Fried made undisclosed diversions of the $1.8 billion it raised, and provided undisclosed special treatment to Alameda Research LLC, a private crypto hedge fund run by him.
The SEC also charged him with commingling FTX customers’ funds at Alameda to make undisclosed venture investments, real-estate purchases, and political donations.
The crypto whiz kid who was worth billions orchestrated “a scheme to defraud equity investors,” the SEC said.
Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing, the SEC said.
“In his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX’s sophisticated, automated risk measures to protect customer assets,” the SEC said. “In reality, Bankman-Fried orchestrated a years-long fraud.”
Since at least May, 2019, FTX raised $1.8 billion-plus from equity investors, including approximately $1.1 billion from about 90 U.S.-based investors.
SEC Chair Gary Gensler said Bankman-Fried’s alleged fraud “is a clarion call to crypto platforms that they need to come into compliance with our laws.” Gensler called on crypto players to properly protect customer funds and separate conflicting lines of business.
In parallel actions, the U.S. attorney’s office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) today announced charges against Bankman-Fried.
Ciara Linnane and Jeremy Owns contributed to this report.