According to the SEC complaint, Bankman-Fried raised more than $1.8 billion through an “orchestrated scheme to defraud investors.” He would use the money for risky investments, property purchases, and large political donations. The SEC speaks of ‘years of fraud’ through the construction of a house of cards.
More than a year ago, the flag was displayed on the then only two-year-old cryptocurrency trading platform FTX.
Investors lined up
Young cryptobillionaire Bankman-Fried’s (29) company had raised another $420 million in capital and was valued at $25 billion.
Investors lined up to lend money to the company. Through FTX you can trade popular cryptocurrencies, such as bitcoin and ethereum.
However, the platform also offered derivative investment products such as derivatives, options and crypto ETFs (exchange traded funds) with which it is possible to indirectly invest in cryptocurrencies via an underlying index.
Last month, however, the cryptocurrency exchange collapsed when a takeover failed. This was followed by a digital banking rush. Billions in value evaporated and FTX collapsed when it failed to find new investors. The fallen CEO was later found to have been using his clients’ money for risky investments at his other company, which is called Alameda. Then billions disappeared. He also allegedly misused some of that money for private expenses such as real estate.
‘no intent’
Bankman-Fried himself has always maintained that there was no intent involved. His company was in crisis due to chaotic finances, he said. But now he has been charged and arrested in the Bahamas, where he lives and where his company headquarters were.
A New York City court announced that prosecutors have charged Bankman-Fried with a total of eight counts. In addition to misuse of client funds at FTX for Alameda, it would also result in misleading lenders and clients about the financial health of its crypto companies. He would also launder the proceeds.
The current CEO of FTX, John Ray III, has many criticisms of his predecessor. He claimed that the collapse of the cryptocurrency exchange is the result of the concentration of almost all the responsibilities in a small group of very inexperienced administrators. Also, there was virtually no dividing line between FTX and Alameda.
