The founder of the bankrupt cryptocurrency platform FTX, Sam Bankman-Fried, faces a long prison sentence over fraud charges. The US Securities and Exchange Commission (SEC), the CFTC regulator and a New York prosecutor filed a lawsuit against the 30-year-old on Tuesday. According to the SEC, he “fraudulently” embezzled billions of dollars from investors. Bankman-Fried was arrested the night before at his home in Nassau, Bahamas.
“We believe that Sam Bankman-Fried built a house of cards based on deception while telling investors it was one of the safest buildings in the crypto world,” said SEC Chief Executive Gary Gensler. Investigations into possible further violations are ongoing.
FTX experienced a meteoric rise
Bankman-Fried had epitomized the emergence of cryptocurrencies into a supposedly serious investment unlike any other. His FTX platform was promoted by celebrities in ad campaigns and he himself was a regular guest at political events in Washington, donating millions. At the beginning of November, however, the business structure collapsed.
Central to this is the hedge fund Alameda, which also founded Bankman Fried and into which a large part of the money invested at FTX flowed. On November 2, this connection became known, as well as the fact that Alameda’s funds were mainly held in the cryptocurrency FTT. This in turn was issued by FTX with virtually no value. FTX customers then massively withdrew their capital and the value of FTT plummeted.
FTX was suddenly unable to pay customers the money deposited. On November 11, the company filed for bankruptcy. Investor money is probably gone. The cryptocurrency platform is said to have managed $32 billion at one point. Their bankruptcy shocked the crypto world and caused the price of several digital currencies, such as Bitcoin, to collapse.
The extradition request is pending
Bahamas Attorney General Ryan Pinder said he was awaiting an extradition request from the US. However, Bankman-Fried must appear in court in the capital Nassau on Tuesday. The Bahamas authorities will also launch a “criminal investigation into the FTX bust,” according to Pinder.
Bankman-Fried was scheduled to testify under oath in Congress on Tuesday about the FTX bust. In recent weeks he had ignored legal advice and given a number of interviews. He presented his version of the sudden bankruptcy of his company in various media, usually via a video link from Nassau, where his company is also located.
For example, in an interview with the “Handelsblatt”, Bankman-Fried said that he trusted Alameda too much. The fund was managed by his former partner Caroline Ellison as of 2021.
In addition to the accusation of fraud, there are also market manipulations through the linking of FTX and Alameda. “If convicted, he could spend the rest of his life in prison given the amount of fraud,” legal expert Jacob Frenkel told AFP.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
