SBF Charged With ‘One of the Biggest Financial Frauds in American History’

https://www.barrons.com/articles/ftx-founder-sam-bankman-fried-indictment-51670944659?tesla=y

FTX founder Sam Bankman-Fried was charged with a variety of wire fraud and conspiracy counts, according to a federal indictment unsealed on Tuesday.

“This is one of the biggest financial frauds in American history,” Damian Williams, the U.S. Attorney for the Southern District of New York, said at a press conference on Tuesday.

Bankman-Fried, known as SBF, was arrested in the Bahamas on Monday after authorities said they received a notice from the U.S. that it was likely to request his extradition. The indictment was filed by the U.S. Attorney’s Office for the Southern District of New York on Dec. 9.

According to the indictment, Bankman-Fried was charged with conspiracy to commit wire fraud on customers, wire fraud on customers, conspiracy to commit wire fraud on lenders, wire fraud on lenders, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the United States and violate the campaign finance laws.

Williams said that a grand jury indicted Bankman-Fried on Friday of last week. His office obtained a warrant for arrest, which was executed on Monday in the Bahamas.

“This investigation is very much ongoing, and it is moving very quickly,” Williams said. “While this is our first public announcement, it will not be our last.”

The four main areas of alleged misconduct outlined by Williams include defrauding customers of FTX.com, lenders to Alameda Research, and investors in FTX. The fourth area is an alleged violation of campaign finance laws.

The Associated Press, which cited a spokesperson for U.S. prosecutors, reported Bankman-Fried could be exposed to a maximum of 115 years of prison time if convicted.

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“He could confront substantial jail time, including many years and possibly life,” Carl Tobias, a professor at the University of Richmond School, told Barron’s via email.

Tobias notes that estimating a precise sentence is difficult because it depends on whether the government can prove the charges. Then it’s up to the discretion of a judge who would need to consult sentencing guidelines.

Bankman-Fried is also accused of defrauding lenders by providing false and misleading information about the financial condition of Alameda Research, the crypto trading firm also run by Bankman-Fried that’s at the center of the FTX controversy.

“Bankman-Fried agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund, and to make investments,” the unsealed indictment reads.

Aside from the fraud and conspiracy charges, Bankman-Fried is accused of violating campaign finance laws by seeking to sidestep contribution limits. Williams alleges Bankman-Fried and co-conspirators used stolen customer money to make political contributions to both parties. The contributions were disguised to look like they were coming from wealthy donors, rather than Alameda Research, Williams noted.

“All of this dirty money was used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington,” Williams said.

Williams asked people, entities, and political campaigns that received stolen customer money to work with his office to return the funds to victims.