HomeWorldSam Bankman-Fried charged with fraud and money laundering

Sam Bankman-Fried charged with fraud and money laundering

Federal prosecutors charged FTX Trading founder Sam Bankman-Fried on Tuesday with eight counts of fraud, money laundering and other financial crimes, according to a accusation Unsealed Tuesday.

The US Attorney’s Office for the Southern District of New York alleges that Bankman-Fried knowingly defrauded clients by using their cryptocurrency assets to pay off debts and expenses incurred by the FTX hedge fund, Alameda Research. Bankman-Fried and other accomplices also knowingly submitted inaccurate documents to the lenders who sent funds to Alameda, according to the indictment.

“It’s fair to say that, whatever its license, this is one of the largest financial frauds in American history,” US Attorney Damian Williams said during a news conference in Manhattan on Tuesday.

The unsealed indictment also charges Bankman-Fried with violating political contribution laws by donating to candidates and committees in New York under someone else’s name. Bankman-Fried made “tens of millions of dollars” in contributions to both Democrats and Republicans to influence public policy, Williams said.

“These contributions were disguised to look like they came from wealthy co-conspirators when, in fact, the contributions were funded by Alameda Research with money stolen from clients,” he said.

An attorney for Bankman-Fried, Mark S. Cohen, said Tuesday that Bankman-Fried is reviewing the charges with its legal team and considering its options.

The maximum potential prison term for these charges is 115 years, according to Nicholas Biase, a spokesman for US prosecutors.

Former FTX CEO Sam Bankman-Fried Arrested and Faces Charges of Defrauding Investors


The charges are in addition to fraud charges from the US Securities and Exchange Commission. filed against Bankman-Fried on Tuesday. The SEC accused Bankman-Fried of mixing the funds of FTX clients in Alameda to make undisclosed venture investments, lavish real estate purchases and large political donations.

Commodity Futures Trading Commission Announced similar fraud charges against Bankman-Fried and FTX on Tuesday, alleging in a lawsuit that the company caused customers to lose $8 billion in deposits.

“Bankman-Fried’s claims about FTX’s sophisticated risk controls and other client protections were simply false,” Gurbir Grewal, head of the SEC’s enforcement division, said during the press conference.

Prosecutors are trying to recover as much money as possible for clients, Michael Driscoll, deputy director in charge of the FBI’s New York office, said during the news conference.

“This case is about fraud,” he said. “Fraud is fraud. The complexity of the investment scheme doesn’t matter. The amount involved doesn’t matter.”

United States will request extradition

Authorities in the Bahamas arrested Bankman-Fried Monday night on behalf of the US government for activities he allegedly engaged in while CEO of the now-bankrupt cryptocurrency exchange. He was scheduled to testify about the FTX collapse on Tuesday before the House Financial Services Committee, but his name was struck from the witness list.

The US is expected to ask Bahamian authorities to extradite Bankman-Fried, which experts say is likely within the scope of a treaty between the two countries dating back to 1931.

Because of that existing legal framework, “This would be a time where one could strike while the iron is hot,” Michael Parker, head of the anti-money laundering and sanctions practice at law firm Ferrari & Associates, told CBS News. . “If Mr. Bankman-Fried, for example, went to another jurisdiction, it might be more difficult, so the Bahamas might have been seen as a friendlier jurisdiction from which jurisdiction could take place.”

In pursuing the case against Bankman-Fried, Parker said prosecutors will have to prove that she knowingly committed the alleged crimes outlined in her indictment beyond a reasonable doubt.

Sam Bankman-Fried faces probable extradition to the US after his arrest in the Bahamas


Renato Mariotti, a legal analyst and partner at the Bryan Cave Leighton Paisner law firm, told CBS MoneyWatch that he expects the extradition proceedings to go smoothly, although Bankman-Fried may not appear in the United States until early next year. .

Before his arrest, Bankman-Fried had spoken about the failure of FTX. At a New York Times Dealbook event last month, Bankman-Fried said he was unaware of the scope of FTX’s problems and denied deliberately misleading customers and other parties with whom the company did business.

In court, defendants often deny any intent to commit fraud, Mariotti said, noting that such defenses are sometimes effective. But the FTX case could be different, he added.

“The fraud here is so extensive that it will be difficult to portray it as a small detail that was overlooked,” Mariotti said.

“House of Cards”

FTX was one of the largest cryptocurrency exchanges in the world before it suddenly failed last month. Users withdrew approximately $5 billion worth of crypto assets in a single day as concerns mounted over the solvency of the exchange.

John Ray III, who took over as FTX chief executive after Bankman-Fried resigned on November 11 after a long career that included overseeing the Enron bankruptcy, told a House hearing on Tuesday that roughly $7 billion was lost in the collapse. Ray alleged that Bankman-Fried and others at FTX embezzled client funds, contributing to the losses.

Ray also said that the FTC “has put in place virtually none of the systems or controls that are necessary for a business that is entrusted with other people’s money or assets.”

“The entire Bankman-Fried house of cards began to crumble when crypto asset prices plummeted in May 2022 and Alameda lenders demanded repayment of billions of dollars in loans,” Grewal said.

Associated Press contributed to this report.

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