The U.S. Securities and Exchange Commission on Tuesday filed a civil complaint accusing Sam Bankman-Fried of “orchestrating a scheme to defraud equity investors in FTX” and seeking to ban him from the cryptocurrency industry.
What to watch: This comes ahead of criminal charges that will be announced later this morning by prosecutors for the Southern District of New York.
- The SEC — which filed the complaint in a New York federal court — also noted that SBF is expected to face criminal charges.
Why it matters: A growing number of media reports and statements from FTX’s new CEO and Bankman-Fried himself have suggested that customer funds have been improperly accessed by the company’s top brass.
Catch up quick: On Monday night, before he was set to testify remotely at a House Financial Services Committee hearing, Bahamian authorities arrested Bankman-Fried at the request of U.S. prosecutors. The two countries have an extradition treaty.
Details: The SEC alleged that Bankman-Fried engaged in a “years-long” scheme to defraud investors.
- “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,” SEC Chair Gary Gensler said in a statement. “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 wants a federal judge to force SBF to pay disgorgement penalties and to prevent him from participating in the crypto industry, though he could make personal crypto investments.
Flashback: In early November, after facing a sudden spike in customer withdrawal, Bahamas-based crypto exchange FTX found itself with insufficient funds to cover the requests.
- While Bankman-Fried attempted to secure emergency financing over the next couple of days, the company filed for bankruptcy by the end of the week and he stepped down from his role.
- Bankman-Fried has since given numerous public interviews, in which he largely blames poor risk management and internal controls.
The big question: Who else are prosecutors preparing to charge (if anyone) with regard to FTX?