Bankman-Fried had “built a house of cards on a foundation of deception” in his dealings with buyers in his FTX crypto agency, the SEC stated.
“Today we’re holding Mr. Bankman-Fried chargeable for fraudulently elevating billions of {dollars} from buyers in FTX and misusing funds belonging to FTX’s buying and selling prospects.”
The cost comes a day after Bankman-Fried was arrested within the Bahamas on the eve of his scheduled look at a US congressional listening to during which he was to testify beneath oath in regards to the crypto alternate’s in a single day demise.
The SEC stated investigations “as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
The 30-year-old had in latest weeks defied authorized recommendation and made a number of media appearances providing his model of his firm’s sudden failure, often by video hyperlink from the Bahamas, the place his firm is headquartered.
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According to a press launch from the lawyer normal’s workplace within the Bahamas, Bankman-Fried was to be held in custody earlier than an anticipated request for his extradition by the United States.
The Bahamian prime minister’s workplace shared news of the arrest, in addition to a police assertion saying Bankman-Fried was arrested within the early night at his residence advanced within the capital Nassau.
He was taken into custody with out incident, the assertion stated, and was to look in court docket in Nassau on Tuesday.
As a lot as anybody, Bankman-Fried had embodied the obvious emergence of cryptocurrency as an above-board funding slightly than a frowned-upon get-rich-quick scheme shunned by the banking institution.
His FTX platform was plugged by celebrities in promoting campaigns and the cyber whiz child turned an everyday presence in Washington, the place he donated tens of tens of millions of {dollars} in political contributions.
But after reaching a valuation of $32 billion, FTX’s implosion was swift following a November 2 report on ties between FTX and Alameda, a buying and selling firm additionally managed by Bankman-Fried.
The report uncovered that Alameda’s stability sheet was closely constructed on the FTT foreign money — a token created by FTX with no impartial worth.
– ‘Grossly inexperienced’ –
The value of FTT plunged in early November, roiling each Alameda and FTX, the place Alameda had massive buying and selling positions.
Reeling from buyer withdrawals and brief some $8 billion, FTX and round 100 associated entities filed for chapter safety on November 11, inviting scrutiny from regulators, prosecutors and livid shoppers.
Among the revelations, FTX is suspected of fraud for propping up Alameda with billions of {dollars} in buyer funds that at the moment are doubtless misplaced endlessly.
Questions additionally linger over whether or not Bankman-Fried engaged in market manipulation, or illegally supplied inside info to Alameda.
“If convicted he could be facing the rest of his life in prison, given the dollar amount of the fraud,” Jacob S. Frenkel, a former federal legal prosecutor at Dickinson Wright, advised AFP.
“We would not see an indictment if prosecutors were not absolutely convinced that they will win a conviction,” he added.
In his media interviews, Bankman-Fried has admitted to errors, however has denied intent to defraud his prospects.
FTX CEO John Ray, who got here to the corporate after the debacle, was to inform Congress on Tuesday that the issues arose as a result of management was “in the hands of a very small group of grossly inexperienced and unsophisticated individuals.”
“Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever,” Ray stated in ready remarks.
The fall of FTX has induced main doubts about the long run viability of cryptocurrency and heaped stress on different platforms and entities that rode the success of Bitcoin and different currencies.