After the problems at FTX and the related crypto hedge fund Alameda Research, their founder Sam Bankman-Fried managed to avoid justice for a long time. Despite rumors that he committed large-scale fraud, he was not arrested. That has now changed. Both the US SEC and the CFTC have filed a lawsuit against him.
SEC files lawsuit against SBF
This week he was arrested by the Bahamas police on suspicion of fraud and money laundering. There was another chance for bail, but it was rejected. The Securities and Exchange Commission (SEC) writes in a press release Which Sam Bankman-Fried, also known as ‘SBF,’ defrauded investors in FTX. Investors in the company have raised more than $1.8 billion, including more than $1.1 billion from approximately 90 U.S. investors.
He allegedly funneled money from FTX clients (not to be confused with investors in FTX stock) to his hedge fund, Alameda Research. He would then not have communicated this to investors. “Investors thought it was one of the safest companies in the crypto industry, but in fact this funneling of capital has made it one big house of cards,” said SEC Director Gary Gensler.
The institute illustrates that Alameda was heavily exposed to FTX’s own FTT token, overvalued assets and illiquid assets. FTX also gave Alameda virtually ‘infinite credit’. Users’ funds would have been used for this. In addition, funds from FTX’s clients appear to have been used to buy expensive villas in the Bahamas for employees and to make large, personal political donations.
CFTC also starts lawsuit: find the differences
The Commodities Futures Trading Commission (CFTC) is started almost exactly the same lawsuit. This policy maker emphasizes that the former FTX CEO has also purchased private jets with customer money.
Why exactly the two institutes started separate lawsuits is not clear, since the issues raised amount to almost exactly the same thing. An important difference, however, is that the SEC is only suing Sam Bankman-Fried, while the CFTC is taking SBF, FTX and Alameda Research to court.