Source: https://www.linkedin.com/feed/update/urn%3Ali%3AugcPost%3A7008436741644705792
U.S. Securities and Exchange Commission SEC Charges #SamuelBankmanFried #SBF with #Defrauding #Investors in #Crypto #Asset #Trading #Platform #FTX: Following our analysis already posted on this LinkedIn feed over the recent weeks: https://lnkd.in/g-vi4xYk :
FOR IMMEDIATE RELEASE
2022-219
Washington D.C., Dec. 13, 2022 —
According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors. In his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, *specifically touting FTX’s sophisticated, automated risk measures to protect customer assets*. The complaint alleges that, in reality, Bankman-Fried orchestrated a years-long fraud to conceal from FTX’s investors (1) the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund; (2) the undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit” funded by the platform’s customers and exempting Alameda from certain key FTX risk mitigation measures; and (3) undisclosed risk stemming from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens. The complaint further alleges that Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations.
“We allege that Sam Bankman-Fried built a *house of cards* on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said #SEC Chair #GaryGensler. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into #compliance with our laws. Compliance protects both those who invest on and those who invest in crypto platforms with time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business. It also shines a light into trading platform conduct for both investors through disclosure and regulators through examination authority. To those platforms that don’t comply with our securities laws, the SEC’s Enforcement Division is ready to take action.”
“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, *touting its best-in-class controls, including a proprietary ‘risk engine,’* and FTX’s adherence to specific investor protection principles and detailed terms of service. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent…”
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