An accusation came from the US Securities and Exchange Commission after FTX CEO Samuel Bankman-Fried was arrested in the morning.
“The SEC has accused SBF of defrauding investors through the crypto-asset trading platform FTX,” the SEC press release states.
“We argue that Sam Bankman-Fried is building on a foundation of deception while telling investors this is one of the safest places in crypto,” said SEC Chairman Gary Gensler.
The headlines in the SEC’s press release are as follows:
“The Securities and Exchange Commission today accused Samuel Bankman-Fried of establishing a scheme to defraud stock investors at FTX Trading Ltd. (FTX), the crypto trading platform of which he is CEO and co-founder.
Since May 2019, FTX has raised more than $1.8 billion from equity investors, including nearly $1.1 billion from 90 US-based investors. In his statements to investors, Bankman-Fried promoted FTX as a secure crypto-asset trading platform and specifically highlighted FTX’s advanced risk measures to protect client assets.
Our complaint is that Bankman-Fried is actually from FTX investors;
(1) undisclosed diversion of funds from FTX clients to Alameda Research LLC, its private crypto hedge fund;
(2) the undisclosed special treatment provided to Alameda on the FTX platform to provide Alameda with a virtually unlimited “line of credit” funded by the platform’s customers and exempt Alameda from FTX risk mitigation measures;
(3) Covers FTX’s undisclosed risk from exposure to Alameda’s overvalued, illiquid assets such as FTX-linked tokens.
Our complaint further alleges that Bankman-Fried made unexplained investments, purchases luxury real estate, and used funds from some FTX clients in Alameda to make large political donations.
SEC Chairman Gensler: “The fraud allegedly committed by Mr. Bankman-Fried is a clear call to crypto platforms that they must comply with our laws. For platforms that do not comply with our securities laws, the SEC’s Enforcement Division is ready to take action.
The SEC’s complaint accuses Bankman-Fried of violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC has sought injunctive relief against future securities law violations. Requested an injunction prohibiting the issuance, purchase, offer or sale of any securities other than Bankman-Fried’s own personal account.”
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SEC Accuses Samuel Bankman-Fried of Fraud Investors on Crypto Asset Trading Platform FTX
— Bitcoin System (@bitcoinsystem) December 13, 2022