Last month FTX, the fourth largest crypto exchange in the world, was in the headlines for filing for bankruptcy. A month later, recently, it was back in the news but for one of the biggest financial fraud cases in history.
Sam Bankman Fried, who resigned in November from FTX, has been accused by US prosecutors of carrying out one of the biggest financial frauds in American history. The ex-CEO of failed cryptocurrency exchange FTX was arrested on 12 December, Monday, from his luxury penthouse in the Bahamas by the cops after criminal charges were filed against him by prosecutors with the Attorney’s Office for the Southern District of New York.
Ex-CEO OF FTX Sam Bankman-Fried Charged With Fraud
The US Department of Justice charged SBF with eight conspiracies including wire fraud on customers and lenders, money laundering, and violations of campaign finance law.
The indictment unsealed on Tuesday states that the conspiracy ran from the year he founded FTX which is 2019.
If convicted, Bankman-Fried can face prison for years, up to 115 years if given the maximum sentence, due to the misappropriate deposits of exchange customers to pay debts and expenses of his private trading firm Alameda Research.
According to a press release from the US Attorney’s Office for the Southern District of New York that each federal charges against him carry a maximum of 20 years prison sentence and see up to five years in prison for each count of conspiracy to commit commodities fraud and security frauds and defrauding the United States.
Chief Magistrate of the Commonwealth of The Bahamas Joyann Ferguson-Pratt has denied bail for the 30-year-old public face of the crypto industry, Sam Bankman-Fried. He was denied bail because as per the authorities, Fired posed a flight risk considering his access to substantial finances.
Gary Gensler, chairman of the SEC, did not dispel industry fears but rather stated that they allege Sam Bankman Fire of building a house of cards on a foundation of deception while assuring investors that the FTX was one of the safest buildings in the crypto world. He went on to say that “Mr. Bankman-alleged Fried’s fraud is a clarion call to crypto platforms that they need to comply with our laws.”
The founder of FTX and Alameda Research is one of the largest donors of the Democratic Political party. Although he also funds the Republican Party, hiding the donations as a bribe or dark money for favorable cryptocurrency regulation. Other FTX entities also gave cash to political parties to manipulate and influence politicians to work for policies in their favor. Along with politicians, he and FTX were generous donors to media groups and charities. He was giving at least $95,000 to politicians after the investigation of FTX began, according to the reports.
The FTX shocked the world with its failure and bankruptcy as it resulted in billions of dollars of potential losses for millions of people and retail investors. The Bahamas-based FTX was valued at $32 billion, and the ex-CEO had a fortune of $26 billion before the crypto exchange collapsed in November.
John Ray III, the new chief executive officer of FTX and with 40 years of experience overseeing some of the biggest bankruptcies in the world said that he had never seen such an utter lack of record keeping in any company. In addition, he said that there were absolutely no internal controls whatsoever. In a comparison of FTX’s case with Enron’s case, the energy firm that collapsed after bankruptcy, he said that Enron’s criminals were highly sophisticated whereas FTX executives had engaged in old-fashioned embezzlement.
Bankman-Fried’s lawyer, Mark Cohen, said that his client is reviewing the charges with the legal team and considering all the legal options currently. The next court hearing of Sam Bankman-Fried is on 8 February 2023 in the morning.