Breaking: SEC Charges Sam Bankman-Fried with Defrauding Investors
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Breaking: SEC Charges Sam Bankman-Fried with Defrauding Investors

The Securities and Exchange Commission has charged Mr.Bankman-Fried of fraud.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The SEC has filed charges against former FTX CEO Sam Bankman-Fried, the securities regulator said in a doc released Tuesday. The SEC accused SBF of orchestrating a years-long scheme to defraud investors who committed nearly $2 billion to the fallen crypto exchange.

Bankman-Fried Built a “House of Cards” While Defrauding Investors, Says SEC

The U.S. Securities and Exchange Commission (SEC) filed civil securities fraud charges on Tuesday against Sam Bankman-Fried, the co-founder and former CEO of the now-bankrupt crypto exchange FTX. The SEC accuses SBF of misleading investors about the financial health of FTX and its sister crypto trading firm Alameda Research.

According to the securities regulator, SBF had orchestrated a “years-long” fraud to conceal several things from FTX’s investors. These include “the undisclosed diversion of FTX customers’ funds to Alameda Research” – a move that was at the center of the FTX collapse.

Additionally, the SEC accuses SBF of failing to disclose FTX’s “special treatment” to Alameda as the crypto exchange provided the crypto hedge fund with “a virtually unlimited line of credit” using user funds, as well as relieving Alameda from specific key FTX risk reduction measures, SEC said in the filing. Finally, the regulator also mentions the unreported risk coming from the exchange’s exposure to Alameda’s substantial holdings of illiquid and overvalued assets such as FTX’s native token, FTT.

The SEC says SBF defrauded customers by convincing them it was safe to trade billions of dollars worth of crypto on FTX. It added that the user funds were mixed with funds at Alameda, which were then used to invest in outside projects, real estate, and for political donations.

“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.”

– Gary Gensler, Chair of the U.S. Securities and Exchange Commission.

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Federal Prosecutors Expected to Unseal Criminal Indictment Against SBF on Dec. 13

SEC’s charges against SBF come just a day after Bahaman authorities arrested SBF. According to the Attorney General’s Office, Bahaman police received a notice from the US that it had filed criminal charges against the 30-year-old billionaire.

Federal prosecutors in Manhattan are expected to unwrap a criminal indictment against SBF on Tuesday and charge him with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.

SBF was supposed to attend a hearing before the House Committee on Financial Services on Dec. 13. US representative Maxine Waters said she is “disappointed” that SBF will not be able to appear before the committee following his arrest.

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Do you think SBF could face a serious prison sentence in the wake of the latest developments? Let us know in the comments below.