One of the biggest names in the crypto industry has been charged by U.S. regulators with defrauding investors.
Sam Bankman-Fried, the founder and former CEO of the cryptocurrency exchange FTX, was arrested in the Bahamas after receiving formal notification from the United States that criminal charges had been filed against him there.
FTX is the world’s second-largest cryptocurrency exchange. It filed for bankruptcy protection last month, and Bankman-Fried resigned as chief executive.
It triggered a wave of public demands for greater regulation of the cryptocurrency industry.
Regulators called it a “house of cards” in its charges against Bankman-Fried, and more charges are expected later today.
Both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) alleged Bankman-Fried committed fraud in lawsuits filed on Tuesday. Criminal charges from the U.S. Department of Justice are also expected.
The 30-year-old was arrested in his home in the Bahamas, where FTX was based. It remains to be seen whether there will be a legal battle to extradite him to the U.S.
“While he spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments, Bankman-Fried’s house of cards began to crumble,” the filing said.
Since at least May 2019, FTX raised more than $1.8 billion from equity investors in a years-long “brazen, multi-year scheme” in which Bankman-Fried concealed that FTX was diverting customer funds to its affiliated crypto hedge fund, Alameda Research LLC, the SEC alleged.
The SEC said that while the public believed his “lies” and sent billions of dollars into the FTX, Bankmann-Fried improperly diverted customer funds into his own hedge fund. He kept diverting customer funds from FTX, even as it became increasingly clear that Almeda and FTX could not make customers whole.
Bankman-Fried founded FTX in 2019 and rode a cryptocurrency boom to build it into one of the world’s largest exchanges of digital tokens.
Last year, the 30-year-old’s net worth was estimated at $26.5 billion.