FTX founder Sam Bankman-Fried accused of ‘massive, years long’ conspiracy to defraud investors

Sam Bankman-Fried has been accused of overseeing a “massive, years-long fraud” at bankrupt cryptocurrency exchange FTX in a US indictment.

The US Securities and Exchange Commission (SEC) today revealed the details of its indictment against the entrepreneur, accusing him of knowingly misrepresenting the safety and stability of his business.

“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 chairman Gary Gensler.

Charges unsealed by prosecutors in New York on Tuesday allege that Mr Bankman-Fried, 30, created a “massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire”.

Prosecutors allege Mr Bankman-Fried knowingly misled investors, defrauding them of $1.8bn.

FTX also alleged to have given “special treatment” to his personal crypto hedge fund, Alameda Research.

“Bankman-Fried continually diverted FTX customer funds to Alameda and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases,” including a $40m penthouse in the exclusive Albany area of Nassau, capital of the Bahamas.

Alameda received $1.34bn in loans from FTX between 2020 and its eventual bankruptcy in November, according to the indictment. Those loans were “poorly documented, and at times not documented at all”.

Mr Bankman-Fried was arrested by police in the Bahamas on Monday night, the country’s attorney general said.

FTX was valued at $32bn earlier this year but filed for bankruptcy last month after customers rushed to withdraw $6bn in a matter of days.

The collapse of the FTX exchange left more than a million creditors out of pocket, including an estimated 80,000 in the UK.

FTX’s liquidator John Ray, who wound up Enron after the energy company’s 2002 collapse, has previously described FTX as having the worst corporate governance controls he had ever seen.

In a series of interviews and public appearances in late November and December, Mr Bankman-Fried acknowledged risk management failures but sought to distance himself from accusations of fraud.

He said he never knowingly used customer funds on FTX at his proprietary trading firm, Alameda Research.

“I didn’t ever try to commit fraud,” Mr Bankman-Fried said in a November 30 interview at the New York Times’ Dealbook Summit, adding he does not personally think he has any criminal liability.