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Sam Bankman-Fried was charged with fraud by the U.S. Securities and Exchange Commission over the collapse of FTX, the crypto exchange he founded.
The former CEO was charged with “orchestrating a scheme to defraud equity investors in FTX Trading Ltd.,” according to an SEC statement. It said investigations into other securities law violations and other individuals are ongoing.
Bankman-Fried was arrested in the Bahamas yesterday, just one day before he was scheduled to testify virtually before the U.S. House Financial Services Committee for its first hearing on the collapse of the company.
“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,” said SEC Chair Gary Gensler in the release. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”
The SEC is charging Bankman-Fried with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The regulator is also seeking an injunction against future securities law violations, which means Bankman-Fried would not be able to issue, purchase, offer or sell any securities except for his own personal account.
In addition, it seeks legal repayment of his “ill-gotten gains,” a civil penalty and a bar on officer and director roles at SEC-reporting companies.
The U.S. Attorney’s Office for the Southern District of New York (U.S. SDNY) and the Commodity Futures Trading Commission (CFTC) will also announce charges against Bankman-Fried, the release said.
The SEC thanked the SDNY, the FBI and the CFTC for their assistance.
The investigation will be conducted by Devlin Su, Ivan Snyder, and David S. Brown of the SEC’s Crypto Assets and Cyber Unit and Brian Huchro and Pasha Salimi.
The SEC’s litigation will be led by Amy Burkart and David D’Addio.
Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.
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