MANHATTAN (CN) — Sam Bankman-Fried, the founder and former CEO of crypto’s second-largest exchange, FTX, was slapped with an eight-count criminal indictment Tuesday as well as a separate complaint from the Securities and Exchange Commission.
The federal criminal indictment against the 30-year-old comes after his arrest Monday night by Bahamian authorities.
At a press conference on Tuesday afternoon, U.S. Attorney Damian Williams for the Southern District of New York called the FTX founder's scheme "one of the biggest financial frauds in America’s history."
Bankman-Fried is charged with misappropriating billions of dollars of FTX customers’ funds to pay expenses and debts of a crypto hedge fund, Alameda Research, of which he was a co-founder and majority share owner. Federal prosecutors had brought the indictment under seal on Friday, Dec. 9.
It is broken down into four counts of fraud and four counts of conspiracy, including violations of campaign finance laws, and has been assigned to U.S. District Judge Ronnie Abrams, an Obama appointee.
“We charged that Bankman-Fried violated federal campaign finance laws by causing tens of millions in illegal campaign contributions to made to candidates and committees associated with both Democrats and Republicans,” Williams said on Tuesday. “These contributions were designed to look like they were coming from wealthy co-conspirators, when in fact, when contributions were funded by Alameda Research with stolen customer money.”
As of Tuesday morning, the Department of Justice could not confirm the timing of Bankman-Fried's extradition by Bahamian authorities.
FTX filed for bankruptcy and Bankman-Fried stepped down as CEO after the sudden and spectacular collapse of the crypto exchange he founded in May 2019. FTX customers quickly filed suit for violations of federal anti-racketeering law.
The Southern District of New York’s case is being handled by Assistant U.S. Attorneys Danielle Sassoon and Nicolas Roos.
U.S. Attorney Williams on Tuesday called the investigation "all-hands-on-deck ... here at SDNY," and confirmed the probe remains "very much ongoing and it’s moving very quickly."
Shortly before the indictment was unsealed on Tuesday, the Securities and Exchange filed a separate civil securities complaint in the same district. This suit alleges that Bankman-Fried was "diverting billions" of dollars of customers' money for his "crypto empire."
The Commodity Futures Trading Commission filed a third, separate complaint against Bankman-Fried on Tuesday. It alleges that his scheme to siphon FTX customer funds to Alameda accounted for over $8 billion in customer deposits that were missing at the time of FTX's collapse.
Before his arrest in the Bahamas, Bankman-Fried was due to testify Tuesday in front of the House Financial Services Committee. The hearing into the collapse of the crypto exchange will still go forward, now with FTX's new CEO John Ray set to testify.
Representative Maxine Waters, a California Democrat who chairs the financial services committee, expressed her disappointment about the timing.
“Although Mr. Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr. Bankman-Fried about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many,” Waters said in a statement Monday evening.
Bankman-Fried’s fortune was estimated around $17 billion this year according to Forbes. He said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
Cryptocurrency surged in popularity during the pandemic with millions of new investors. But as inflation intensified the cost of living and federal interest rates hiked over 2022, many investors have pulled their deposits out of the increasingly volatile industry. This has caused the value of bitcoin to fall significantly to about $17,000 from last year's $68,000.
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