Here’s everything Sam Bankman-Fried is accused of by the US government

On Monday evening, Bahamian authorities arrested FTX founder and former CEO Sam Bankman-Fried at the request of the US government. The following morning, the Securities and Exchange Commission (SEC), Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) filed formal civil and criminal charges against Bankman-Fried in “parallel actions.” It was a lot to take in all at once, so below Engadget has broken up current charges against SBF by agency, with some additional context provided.

Those indictments likely represent only the start of Bankman-Fried’s troubles. In addition to the charges it announced on Tuesday, the SEC said it was investigating Bankman-Fried for other securities violations. The agency also announced that it’s actively examining the actions of other FTX executives and employees. As more charges are unsealed, Engadget will continue to update this article.

Securities and Exchange Commission

The Securities and Exchange Commission accused SBF of defrauding FTX investors and customers of more than $1.9 billion. Starting as early as May 2019 until as recently as this past November, “Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customers funds for his own personal benefit and to help grow his crypto empire,” the SEC said.

All the while, Bankman-Fried portrayed himself as a responsible business leader building a safe trading platform with “sophisticated, automated measures to protect customer assets.” In reality, the SEC says, “Bankman-Fried orchestrated a fraud to conceal the diversion of customer funds to his privately-held crypto hedge fund, Alameda Research.”

Bankman-Fried told investors and customers FTX’s sister company was just another platform on the exchange with no special privileges to speak of. “These statements were false and misleading,” according to the SEC. Alameda had access to a “virtually unlimited ‘line of credit” unknowingly funded by FTX customers. In May 2022, when Alameda’s lenders demanded the firm repay loans worth billions of dollars, Bankman-Fried allegedly directed FTX to divert even more money to the hedge fund.

The SEC seeks to bar Bankman-Friend from trading securities in the future. The agency also wants to seize his ill-gotten gains and bar him from acting as an officer or director at another company.

Current FTX CEO John Ray III testified before the House Financial Services Committee on Tuesday — SBF had said he would attend the hearing before his arrest. Ray spoke to some of the allegations detailed by the SEC. “This is really old-fashioned embezzlement,” he told the panel. “We’ve lost $8 billion. I don’t trust a single piece of paper in this organization.”

Department of Justice

In addition to civil charges, Bankman-Fried faces a criminal indictment from the Justice Department. On Tuesday, prosecutors from the Southern District of New York filed eight charges against the former executive, including multiple counts of wire fraud. The Justice Department alleges SBF conspired with other individuals to defraud investors by sharing misleading information about FTX and Alameda’s financial condition. Prosecutors further accused him of attempting to commit commodities and securities fraud. On top of that, Bankman-Fried allegedly broke federal election laws by donating more than is legally allowed and in the names of other people.

SBF spoke about his political donations in a recent interview with journalist Tiffany Fong. “I donated to both parties. I donated about the same amount to both parties,” he said. “All my Republican donations were dark. The reason was not for regulatory reasons, it’s because reporters freak the fuck out if you donate to Republicans.”

It’s worth emphasizing how serious the criminal charges against Bankman-Fried are. For context, a federal judge recently sentenced Theranos founder and former CEO Elizabeth Holmes to 11 years in prison for defrauding the company’s investors and patients. Meanwhile, Ramesh “Sunny” Balwani, the startup’s former chief operating officer, was sentenced to nearly 13 years in prison for his role in the scheme. Sam Bankman-Fried stands accused of defrauding investors of almost $2 billion, or about twice what investors lost to Theranos.

Commodity Futures Trading Commission

Rounding out the current charges against Bankman-Fried, the Commodity Futures Trading Commission accused the former executive of using Alameda Research to “surreptitiously” siphon customer funds. “At Bankman-Fried’s direction, FTX executives created features in the underlying code for FTX that allowed Alameda to maintain an essentially unlimited line of credit on FTX,” the regulator alleges. It adds that Alameda had other “unfair” advantages, including an exemption from the platform’s auto-liquidation risk management process.

As early as May 2019, SBF and “at least one” other Alameda executive directed the firm to use FTX customer funds to trade on competing platforms and buy “high-risk” digital assets. Additionally, the CFTC alleges that Bankman-Fried and his cohorts “took hundreds of millions of dollars in poorly-documented ‘loans’ from Alameda,” which they then used to purchase real estate and make political donations.

For his actions, the CFTC is seeking to ban Bankman-Fried from trading derivatives and impose civil penalties against him. It also wants to bar him from acting as a director or officer in the future.

Eight charged in $114 million pump-and-dump stock scheme on Discord and Twitter

The US government just clamped down on a prominent online financial fraud. A federal grand jury and the Securities and Exchange Commission have charged eight men with allegedly operating a stock pump-and-dump scheme on Discord and Twitter between January 2020 and April 2022. They reportedly used their social media presences (including a combined 1.5 million Twitter followers) to artificially inflate the value of stocks, only to sell their shares without disclosing their plans. They made a $114 million profit off the campaign, the Justice Department said.

In addition to tweets, the group supposedly used a Discord server (Atlas Trading) to share misinformation about stocks. One participant, Daniel Knight, also co-hosted a podcast that apparently played a role in the fraud. He brought some of the others on his show and falsely portrayed them as experts, according to the SEC.

All eight are facing at least one charge of conspiracy to commit securities fraud. Edward Constantinescu (aka Constantin), Perry “PJ” Matlock, John Rybarczyk, Gary Deel, Stefan Hrvatin, Tom Cooperman and Mitchell Hennessey are facing additional charges that revolve around securities fraud and (in Constantinescu’s case) unlawful monetary transactions. The SEC has further charged Knight with aiding and abetting the scheme.

The conspiracy and fraud charges carry a maximum sentence of 25 years in prison for each count, while the transactions charge against Constantinescu carries a 10-year maximum. The SEC charges could add financial penalties, including disgorgement of the ill-gotten profits. 

The nature of the manipulation isn’t surprising. The meme stock saga on Reddit showed that online communities can influence share prices in the right circumstances. However, the charges suggest a trend — fraudsters now see social media as a viable way to fool many investors with relatively little effort. Don’t be surprised if you see more cases like this going forward.

Former FTX CEO Sam Bankman-Fried arrested in Bahamas

Looks like embattled FTX CEO Sam Bankman-Fried won’t be testifying before Congress after all. The Bahamas Attorney General’s Office announced Monday that Bankman-Fried has been arrested and is likely to be extradited in short measure back to the US to stand trial. The AG’s office noted that his arrest came after, “receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition.”  

The news of his arrest should come as little surprise given that last Friday the Department of Justice came out and said that it was “closely” examining his role in the multi-billion cryptocurrency exchange’s recent collapse, which is expected to harm more than a million individual investors. Justice Department officials made those statements while meeting with the crypto exchange’s bankruptcy team to discuss whether FTX had improperly moved hundreds of millions of dollars just ahead of its declared bankruptcy last November.

Bankman-Fried was scheduled to testify before Congress at the House Financial Services Committee on Tuesday. However, as United States Attorney Damian Williams explained in a Tweet Monday, Bankman-Fried has been taken into custody “based on a sealed indictment,” which will be revealed and explained in the morning.

“Clearly, I made a lot of mistakes. There are things I would give anything to be able to do over again,” Bankman-Fried recently tried to explain to the New York Times. “I did not ever try to commit fraud on anyone.” 

The Bahamian government is also being accused of collusion — not by the DoJ, but rather FTX itself. Attorneys for the company asserted on Monday (ahead of the arrest news) that the Bahamas as a governing entity had colluded with Bankman-Fried to help move the ill-gotten funds from all those suspicious transactions that took place right before bankruptcy into crypto-wallets controlled by Bahamian regulators.  

Bankman-Fried stepped down from his role of CEO at FTX in November and was replaced by John J. Ray III, an executive who was also helmed Enron through its own bankruptcy proceedings. In his prepared remarks for Tuesday’s now-postponed congressional hearings, Ray painted a bleak picture of FTX’s late stage management and operations. 

In it, he says that FTX went on a $5 billion spending spree in late 2021 and early 2022, “buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them,” as well as making numerous loans and payments amounting to more than $1 billion, “to insiders.” Those funds were also co-mingled with money from Bankman-Fried’s other venture Alameda Research, which also used client funds to engage in high-risk margin trading.

Depending on what the Southern District Attorney’s office unseals tomorrow, Bankman-Fried could be going away for a very long time. Wire and bank fraud on this scale, per a CNBC legal panel, would put Bankman-Fried in jeopardy of life without parole. Former Theranos CEO Elizabeth Holmes and COO Sunny Balwani just got 11 and 12 years in prison, respectively, for their roles in the medical company’s massive fraud case. Ponzi Scheme king Bernie Madoff got 150 years for his shenanigans in 2009, and in 2006, Jeff Skilling was handed 24 years for his role in Enron’s downfall.  

US prosecutors are reportedly investigating FTX founder Sam Bankman-Fried for fraud

US federal prosecutors could be building a fraud case against FTX founder and former CEO Sam Bankman-Fried. Bloomberg reports Justice Department officials met with the crypto exchange’s bankruptcy team this week to discuss documents investigators aim t…

Former Theranos COO Sunny Balwani sentenced to 12 years and 11 months in prison

Ramesh “Sunny” Balwani, Theranos’ former chief operating officer, has been sentenced to nearly 13 years in prison. Balwani was found guilty of all charges in a trial earlier this year that charged him with defrauding the blood testing startup’s patients and investors.

Of note, his sentence is slightly longer than the 11 years and three months given to Elizabeth Holmes, the former CEO of Theranos. Ahead of his sentencing, Balwani’s legal team had asked for probation or house arrest, The Wall Street Journal reported. A probation officer had recommended a nine-year sentence, while prosecutors wanted 15 years in prison.

Balwani will also have to pay restitution, though the amount hasn’t yet been set. He is due to surrender March 15th.

Unlike Holmes, who was not convicted on seven out of 11 total fraud charges in her trial, Balwani was convicted of defrauding Theranos patients in addition to the company’s wealthy investors. As COO, Balwani oversaw the operations of the company’s troubled laboratory, and prosecutors argued that he had detailed knowledge of problems with its blood tests, and the risk they posed to patients.

Though Balwani never rose to the same level of fame as his former partner during his time at Theranos, his relationship with Holmes has played heavily into the intrigue surrounding the company’s downfall. Holmes and Balwani’s relationship featured prominently in The Dropout, a Hulu miniseries about Theranos, and text messages between the two were read aloud in both trials. 

Balwani was also a major part of Holmes’ defense. During her trial, she testified that Balwani had been abusive during their romantic relationship, and that had misled her about issues in the company’s lab. Balwani didn’t testify at his trial or speak during his sentencing hearing.