The criminal charges against Bankman-Fried were revealed Tuesday morning by prosecutors in the Southern District of New York. The founder and former CEO of FTX has been hit with eight counts, including wire fraud, conspiracy to defraud the United States and money laundering. Bankman-Fried was also accused of violating campaign finance laws by making illegal pseudonymous contributions, and was asked by the Justice Department to forfeit his assets.
Damian Williams, SDNY’s U.S. attorney, reiterated the allegations later Tuesday in a Press conference. Williams alleged that Bankman-Fried had “knowingly” defrauded clients and investors of FTX, as well as lenders of Alameda Research, a cryptocurrency hedge fund he founded in 2017. Williams accused Bankman-Fried of secretly and illegally funneling funds of clients from FTX to finance operations in Alameda.
“This is one of the largest financial frauds in American history,” Williams said. She added that while only Bankman-Fried has been charged so far, “we’re not done.”
Williams was joined by a number of US officials in outlining the charges against Bankman-Fried, including Gurbir Grewal, director of the SEC Enforcement Division. The SEC filed a separate set of civil charges against Bankman-Fried on Tuesday, and Grewal warned other unregulated and rogue cryptocurrency trading platforms to register with the SEC soon, or risk running afoul of federal prosecutors.
“An immediate conclusion from today’s announcement should be that non-compliant trading platforms pose dramatic risks to both their investors and their clients,” he said. “It is imperative that non-compliant platforms become compliant.”
Federal regulators have been warning for months about the rise of non-compliant crypto platforms. In May, the SEC announced that Grewal’s division had yielded more than 80 enforcement actions against “fraudulent and unregistered cryptocurrency offerings and platforms” since its inception in 2017. And FTX was far from the only crypto platform to implode and harm investors this year. Bankruptcies a Voyager Digital cryptocurrency lender And crypto hedge fund Three Arrows Capital they were just a few of the many slumps the industry has witnessed.
Grewal warned noncompliant firms that time was running out to register with the SEC, echoing statements made last week by SEC Chairman Gary Gensler, who in a interview with yahoo Finance warned cryptocurrency firms that “the trail is getting shorter” and that they must “comply” with US regulations soon or risk facing legal action.
On Tuesday, Grewal echoed Gensler’s earlier language.
“As President Gensler made clear, the track is shortening to allow them to register with us. And for those who don’t, the Enforcement Division stands ready to act,” he said.
Grewal warned investors and clients to remain cautious of crypto platforms, which he said they “do not provide [customers] with the same robust level of disclosure and protection against fraud and conflicts of interest” as SEC-registered platforms.”
As for Bankman-Fried, the disgraced former CEO was expected to make a virtual appearance at a House hearing Tuesday to answer questions from regulators about the FTX crash and lost client funds, but he is state arrested Monday evening by the authorities of the Bahamas, where he resided, on the instructions of the US government.
The US authorities are likely to require it extradition soon, Bahamian officials said on Monday. Williams said extradition talks were “ongoing” with the Bahamas.
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