FTX founder Sam Bankman-Fried has been charged by the U.S. Securities and Exchange Commission (SEC) on Tuesday with defrauding investors in what regulators called “a house of cards,” hours before he was set to appear before a magistrate in the Bahamas.
Since at least May 2019, FTX raised more than $1.8 billion from equity investors in a years-long fraud in which Bankman-Fried concealed that FTX was diverting customer funds to its affiliated crypto hedge fund Alameda Research LLC, the SEC alleged in a statement.
Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, “lavish real estate purchases” and political donations, it said.
Separate charges would be announced by the U.S. Attorney’s Office for the Southern District for New York and the Commodity Futures Trading Commission later on Tuesday, the SEC said.
Representatives for Bankman-Fried did not immediately respond to requests for comment.
SEC said it was charging Bankman-Fried with violating anti-fraud provisions of U.S. securities laws and would seek a director and officer bar and a penalty against Bankman-Fried.
It would also seek to prevent Bankman-Fried from participating in future securities purchases, offers and sales except for his personal account.
Bankman-Fried was arrested Monday evening in the Bahamas and was expected to appear before a magistrate on Tuesday, marking his first in-person public appearance since the stunning collapse of FTX, which filed for bankruptcy in November after struggling to raise money as traders rushed to withdraw $6 billion from the platform in just 72 hours.
Writing by Tersoo Nicholas