The former boss of one of the largest cryptocurrency exchanges FTX Trading Limited (FTX), Sam Bankman-Fried has been charged with defrauding investors out of $1.8m (£1.5m). He has been charged by the US Securities and Exchange Commission (SEC).
SBF aged 30 was arrested in the Bahamas on 12 December 2022 after authorities there had received formal notice that separate criminal charges had been filed against him in the United States.
On 11 November 2022 FTX filed for bankruptcy in the United States which has left SBF the focus of investigations by both the United States and Bahamian authorities.
Sam Bankman-Fried’s net worth, which peaked at $26bn (£21bn) ran FTX from the Bahamas until he stepped down as Chief Executive last month when FTX filed for bankruptcy.
This comes after FTX was left teetering on the brink of insolvency in early November 2022 when larger crypto exchange rival Binance dramatically withdrew from a non-binding bailout offer.
Binance’s reasons for walking away were cited as “corporate due diligence” and reports of “mishandled customer funds” at FTX which left many investors rushing to withdraw their funds. Without another offer on the table this forced FTX to file for bankruptcy and SBF to resign as Chief Executive.
The news of Sam Bankman-Fried’s arrest in the Bahamas comes just hours before he was due to testify (virtually) in front of the House Financial Services Committee over the $32bn collapse of FTX. He now faces extradition to the United States.
According to the SEC Sam Bankman-Fried diverted customer funds to his first business Alameda Research without informing them. The funds that amassed at Alameda Research were allegedly used to make undisclosed venture investments, purchase expensive properties and make large political donations.
The Chair of SEC, Gary Gensler stated: “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.”
The rapid downfall of FTX has shocked the cryptosphere given it had more than one million customers a few months ago. Many celebrities had previously advertised and endorsed the cryptocurrency platform FTX including Tom Brady, his now ex-wife Giselle Bündchen, Shaquille O'Neal and Larry David.
Frances Murray, Russell-Cooke's financial crime partner, has a wealth of experience in financial crime and is uniquely placed to support clients that are the subject of a criminal investigation or prosecution in respect of cryptoassets.