Sam Bankman-Fried charged with fraud and conspiracy

The Southern District of New York released charges against FTX’s Sam Bankman-Fried, a day after he was arrested in the Bahamas.

The charges include eight criminal counts, primarily involving fraud and conspiracy, the illicit shifting of money from FTX to Alameda Research (also part of FTX Group) and breach of campaign finance laws.

Bankman-Fried is also being charged by the Securities and Exchange Commission on similar grounds, with the Commission describing FTX as “a house of cards on a foundation of deception”. The Commodity Futures Trading Commission is suing him as well.

The FTX founder is currently held in the Bahamas, pending extradition to the United States, which reports say he will resist in a Bahamian court. He was scheduled to testify to Congress on Monday, but his arrest took that off the table. Bankman-Fried chose to headquarter FTX in the Bahamas — to great fanfare — and was staying there at the time of his arrest.

Forbes, a magazine that passionately covered SBF before his demise, gained an exclusive copy of his testimony. It begins, “I would like to start by formally stating, under oath: I fucked up.” But while he admits to being at fault, he deflects some blame onto both the bankruptcy team – which he heavily criticizes – and Binance, which pulled out of an investment in FTX after learning of its troubles.

FTX’s new CEO John Jay Ray III, appointed after the crypto trading platform filed for bankruptcy in November, testified before Congress on Tuesday. Ray, who also helped bring Enron through its bankruptcy, said last month referring to the way FTX was managed under Bankman-Fried that the “situation was unprecedented.”  His statement to Congress Tuesday said that “never before have I seen such an utter failure of corporate controls at every level of an organization.” In short, the company was a mess, with few “audited or reliable financial statements,” easy access to customer funds by leadership and extremely poor documentation.

Under Bankman-Fried’s leadership, FTX lost billions of dollars. Ray said that although the company only went under a month ago, it was a process long in coming. The horrific management of the company was not conducive to a successful, trustworthy business, and eventually the facade was bound to collapse.

The SEC also issued a warning in its statement on Tuesday, saying that FTX’s behavior and subsequent legal troubles should “serve as a clarion call to crypto platforms that they need to come into compliance with our laws.” It continued, “the SEC’s Enforcement Division is ready to take action” against “those platforms that don’t comply with our securities laws”. The fall of FTX is likely to focus regulators and lawmakers on bringing the crypto industry — which has a fiercely independent streak — under control.