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Sam Bankman-Fried: FTX founder hit with slew of charges including fraud, money laundering

FTX founder Sam Bankman-Fried (center) is led away handcuffed by officers of the Royal Bahamas Police Force in Nassau, Bahamas on December 13, 2022. Sam Bankman-Fried was hit with multiple criminal charges December 13, 2022, accused of committing one of the biggest financial frauds in US history. He will serve time at The Bahamas Department of Corrections until February 8, 2023. (Photo by Mario Duncanson/AFP/Getty Images)

Sam Bankman-Fried, founder of failed crypto empire FTX, has been charged with multiple crimes, including defrauding investors through allegedly concealing ties between FTX and its sister trading arm, Alameda Research. 

U.S. prosecutors for the Justice Department’s Southern District in New York also unsealed a criminal indictment on Bankman-Fried, known as SBF, charging the 30-year-old on eight counts. 

The charges against SBF include wire fraud, wire fraud conspiracy, money laundering, securities fraud, securities fraud conspiracy, including conspiring to defraud the United States and violate campaign finance laws, according to the indictment.

According to the U.S. Securities and Exchange Commission’s separate complaint, Bankman-Fried raised more than $1.8 billion from investors, presenting FTX to customers as a reliable and sophisticated trading platform. In reality, SBF was secretly diverting FTX customer funds into Alameda Research, commingling customer funds in the process. The Commodity Futures Trading Commission also filed charges against SBF in “parallel actions.”

He was arrested in the Bahamas Monday, following criminal charges filed by U.S. prosecutors. The SEC also said in a statement that it had “separately authorized charges relating to Mr. Bankman-Fried’s violations of [the SEC’s] securities laws.” 

Once deemed the darling of the crypto world, SBF was personally worth $26 billion and reigned over a crypto empire that amassed roughly $16 billion in customer deposits. But in November, the exchange collapsed and filed for bankruptcy amid allegations he mismanaged customer funds—a mistake that cost customers billions of dollars, and hit celeb investors like Gisele Bundchen and Mark Zuckerberg.

It’s unclear how much of the lost crypto assets could be recovered, though about $740 million has been clawed back as of Nov. 23, according to FTX court filings. 

SBF was set to testify Tuesday, as the House Financial Services Committee began its investigation into FTX. He will no longer appear at the hearing.

Sam Bankman-Fried, ex-CEO of FTX US Derivatives (center right) | Tom Williams/CQ-Roll Call Inc. via Getty Images | Source: Tom Williams/CQ-Roll Call, Inc via Getty Images

FTX’s spectacular implosion stirred instant speculation of pending legal troubles for the SBF and those close to him. 

SBF is the first person connected to the FTX collapse that regulators targeted, and U.S. prosecutors began laying the groundwork for legal action against him in early December. 

The top issues prosecutors are looking at? How much SBF knew about Alameda Research’s ties to his crypto firm, and how much information he decided to withhold from investors. Alameda was started by SBF before he founded FTX.

In the time between FTX’s demise and SBF’s arrest, the crypto founder kept speaking to reporters and to the public, despite lawyers’ warnings that his public statements may further his legal troubles. 

In one interview, SBF flatly admitted that he had no explanation for customers’ billions of dollars in missing funds.

In another media appearance, SBF continued to claim ignorance of the ties between FTX and Alameda Research, and he doubled-down on this position at the NYT DealBook Summit. But openly said he regretted the closeness of the two firms. 

These comments may come back to bite SBF with the new charges filed against him. 

The other major inquiry into FTX investigates whether Bankman-Fried manipulated the market for two cryptocurrencies, TerraUSD and Luna, in the spring. SBF’s (alleged) actions caused a domino effect that first resulted in both cryptocurrencies’ collapse, and then dragged down his own crypto empire in the process. 

Yet again, SBF maintained that he had no knowledge of any market manipulation, in a statement he made to The New York Times. 

Where SBF goes, his family follows. They supported him during the spectacular rise of his crypto empire—even going so far as to become paid employees—and it looks like they’ll be present for every step of his fall from grace. 

A Family Affair

Stanford Tax Law Professor Joe Bankman poses at his home near Stanford Law School on Sept. 12, 2021. | Josh Edelson

His parents are both Stanford Law professors, and they flew out to the Bahamas in November to offer their son support and legal advice. 

“I feel really grateful for the support my parents are still giving me throughout all of this,” SBF said in a virtual appearance at the DealBook Summit.

SBF’s legal team is said to include white-collar crime expert and Stanford professor—a colleague of his parents—David W. Mills. Mills recognized the magnitude of Bankman-Fried’s predicament in November, early on in the crypto firm’s collapse. 

“Sam needs lawyers, and desperately,” Mills told Joseph Bankman in a call in November, according to the Wall Street Journal.

Nonetheless, the long legal battle ahead will likely be a difficult one for his family: Hefty legal fees may bring financial ruin to the family, according to sources close to the matter.