Wednesday, December 14, 2022

Sam Bankman-Fried, the founder of FTX, has been charged with defrauding investors and has been denied bail

FTX founder Sam Bankman-Fried charged with defrauding investors, denied bail

 NASSAU: A judge in the Bahamas denied Sam Bankman-Fried bail and instead sent him to a local correctional facility after US prosecutors on Tuesday accused him of fraud and violating campaign finance laws.

After the magistrate judge denied bail on the grounds of a "great" risk of flight, the former FTX CEO, who was arrested in the Bahamas on Monday, lowered his head and gave his parents a hug.

According to a local official, he was ordered remanded to a correctional facility on the island nation until February 8, when he will initially be held in the medical department.

The day's events marked the culmination of a stunning fall from grace for the 30-year-old, who built FTX into one of the largest exchanges in the world during the cryptocurrency boom and amassed a fortune worth more than $20 billion before it collapsed this year.

Bankman-Fried has previously offered his apologies to customers and acknowledged oversight flaws at FTX, but he has stated that he does not personally believe he is liable for any criminal offenses.

As part of one of the "biggest financial frauds in American history," US Attorney Damian Williams in New York stated earlier on Tuesday that Bankman-Fried made illegal campaign contributions to Democrats and Republicans with "stolen customer money."

He stated, "Though this is our first public announcement, it will not be our last," adding that Bankman-Fried "made tens of millions of dollars in campaign contributions."

Prosecutors said that if Bankman-Fried is found guilty on all eight counts, he faces a maximum sentence of 115 years in prison. However, any sentence would be contingent on a variety of factors.

Williams did not say if other FTX executives would be charged by prosecutors or if any FTX insiders would cooperate with the investigation.

Bankman-Fried made his first public appearance on Tuesday in person in the Bahamas, where the cryptocurrency exchange is based and where he was arrested at his gated community in the capital, Nassau.

When he arrived at the heavily guarded Bahamas court and informed the judge that he could fight extradition to the United States, he seemed at ease.

If Bankman-Fried fights extradition, Bahamian prosecutors had requested that he not be granted bail.

In a previous statement, his attorney, Mark S. Cohen, stated, "Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options."

Scheme that is "brazen" John Ray, the current CEO of FTX, told lawmakers in Congress on Tuesday that the company had lost $8 billion in client funds. He said that the company had shown "absolute concentration of control in the hands of a small group of grossly inexperienced, nonsophisticated individuals."

In the arraignment unlocked on Tuesday morning, US examiners said Bankman-Seared had taken part in a plan to cheat FTX's clients by misusing their stores to pay for costs and obligations and to make ventures for his crypto mutual funds, Alameda Exploration LLC.

He likewise cheated banks to Alameda by giving bogus and deluding data about the speculative stock investments' condition, and tried to mask the cash he had procured from committing wire misrepresentation, examiners said.

In lawsuits filed on Tuesday, the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) claimed that Bankman-Fried had committed fraud.

On Tuesday, the CFTC filed a lawsuit against Bankman-Fried, Alameda, and FTX for alleged fraud involving digital commodity assets.

According to the SEC, FTX has raised more than $1.8 billion from equity investors since at least May 2019 in a "brazen, multi-year scheme" over several years in which Bankman-Fried concealed that FTX was transferring customer funds to Alameda Research. Bankman-Fried, who founded FTX in 2019, was an unconventional figure who appeared on panels with prominent figures like former US President Bill Clinton and wore shorts, t-shirts, and wild hair. He contributed $5.2 million to President Joe Biden's 2020 campaign, making him one of the biggest Democratic donors. A year ago, Forbes estimated that he was worth $26.5 billion.

On November 11, FTX declared bankruptcy, resulting in billion-dollar losses for an estimated one million customers and other investors. The collapse sent bitcoin and other digital assets plunging, reverberating throughout the cryptosphere.

This year, as digital asset markets fell from their peaks in 2021, the collapse was one of several bankruptcy filings in the cryptocurrency industry. A platform where investors can trade digital tokens like bitcoin is known as a crypto exchange.

The US Congress is also considering drafting legislation to control an industry that is not strictly regulated as legal challenges mount.

FTX has imparted discoveries to the SEC and US examiners, and is researching whether Bankman-Broiled's folks were associated with the activity.

Bankman-Fried's extradition to the United States is expected, according to the Bahamas' attorney general's office.

On the same day that the bankruptcy was filed, Bankman-Fried resigned as CEO of FTX. According to Reuters, his covert use of $10 billion in customer funds to support his proprietary trading firm Alameda caused FTX's liquidity crisis. Customer funds totaled at least $1 billion had vanished.

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