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Several US government agencies held a press conference Tuesday afternoon regarding the indictment of FTX’s former CEO, Sam Bankman-Fried.
When asked if the companies were pressing charges against other people allegedly involved FTX collapseDamian Williams, U.S. Attorney for the Southern District of New York, said during the event, “All I can say is this: Clearly, we’re not done.”
The US Attorney’s Office, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) all met a few hours later. Charges were filed against Bankman-Fried the previous day.
This happened after Bankmann-Fried Arrest Monday night in the Bahamas. Gurbir Grewal, director of the SEC’s Division of Enforcement, said during the conference that Bankman-Fried was “indicted for a multi-year scheme to defraud FTX’s investors.” Bankman-Fried is being investigated for other bond violations. The US Attorney’s Office and the CFTC filed charges against him in “parallel proceedings.”
Williams declined to comment on whether FTX-related individuals have cooperated in the investigation to date, but reiterated the importance of those who have not “to do so and to do so quickly.”
“As alleged in our complaint, beginning in 2019 and continuing through November 2022, Bankman-Fried raised more than $1.8 billion from equity investors based on falsehoods,” Grewal said. “FTX operates behind a legal veneer created by Bankman-Fried, among others … but as we allege in our complaint, that veneer was not thin, it was fraudulent.”
Grewal said that since the launch of FTX in 2019, Bankman-Fried has been secretly diverting client funds to its crypto hedge fund, Alameda Research. “As alleged in our complaint, he misused those funds to make undisclosed venture investments, lavish real estate purchases and large political donations.”
When asked during the conference call about what happened to the Bernie Madoff Ponzi scheme that caused FTX’s collapse, Williams said, “It’s hard to compare these things, but it was one of the biggest financial frauds in American history.”
Grewal added that Bankman-Fried’s previous statements that the crypto exchange operates with “sophisticated risk controls and other customer protections” are “simply bogus.”
“He often said that Alameda was just another customer with no special offers,” Grewal said. “[But] He made unlimited loans to Alameda by FTX customers, and he diverted billions of dollars of customer funds from FTX to Alameda.”
Grewal’s takeaway surrounding the FTX collapse is simple: non-compliant trading platforms pose dramatic risks to investors and clients. “Among other things, they don’t provide them with the same strong disclosures and protections against fraud and conflicts of interest. That’s what traditional US-registered exchanges offer, so it’s important for non-compliant platforms to come into compliance.”
“The runway is getting shorter for them to come and register with us,” Grewal said. The Enforcement Directorate is ready to take action against those who fail to do so.
In separate news, the US House Financial Services Committee held a hearing on Tuesday morning focusing on FTX’s collapse. The four-hour hearing involved many questions. TestimonyYou can read in detail Here.
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