Bankman-Fried Indicted On Criminal Conspiracy And Fraud Charges; Sued Over ‘House Of Cards’

Illustration of a gavel surrounded by NFT.

Federal prosecutors have charged disgraced FTX founder Sam Bankman-Fried with eight criminal counts after his arrest in the Bahamas on Monday.

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In addition, the SEC filed charges against Bankman-Fried for “orchestrating a scheme to defraud equity investors.”

Meanwhile, the Commodity Futures Trading Commission filed charges against Bankman-Fried, FTX and his hedge fund Alameda Research for fraud and material misrepresentations in connection with the sale of digital commodities in interstate commerce.

“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.

The federal indictment — unsealed Tuesday — charges Bankman-Fried with widespread fraud as he built his FTX empire. He faces charges of conspiracy to commit wire fraud and securities fraud, individual charges of securities fraud and wire fraud, money laundering and conspiracy to avoid campaign finance regulations, per several media reports.

Bankman-Fried was in a Bahamas courtroom Tuesday, where he refused to waive his right to an extradition hearing — indicating he may fight being sent to the United States, according to Reuters.

FTX’s story

The charges all stem from the sudden — and complete — collapse of Bankman-Fried’s FTX crypto exchange and related companies.

In early November, the exchange saw a run of withdrawals after prices on FTX’s own token dropped like a rock. Despite being the fourth largest crypto exchange at the time, the FTX empire was thrown into bankruptcy — with allegations Bankman-Fried used customer deposits on the exchange to invest with his Alameda Research hedge fund platform.

The collapse is truly dramatic when one considers just earlier in the year FTX and FTX US had a $32 billion valuation and $8 billion valuation, respectively, before everything fell apart.

Investors in FTX included big names like  Sequoia Capital, NEA, Lightspeed Venture Partners, Insight Partners, Temasek, SoftBank Vision Fund, Thoma Bravo, SoftBank Vision Fund 2 and Coinbase Ventures.

The fall has set off an FTX-induced contagion in the industry. Just this month, crypto exchanges Kraken, Bybit and Swyftx all announced they would be laying off 30% or more of their staff. In a letter to employees, Swyftx’s CEO cited the possibility of more “black swan-type events” and trading volumes likely falling in the first half of 2023 as reasons for the cuts, according to Bloomberg.

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Illustration: Dom Guzman

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