Justice Department unseals charges against FTX founder Sam Bankman-Fried

Dec. 13 (UPI) -- Eight charges against FTX founder Sam Bankman-Fried were unsealed Tuesday connected to an alleged multi-billion dollar fraud scheme.

The Justice Department charged Bankman-Fried with two counts of wire fraud conspiracy, two counts of wire fraud and one count of conspiracy to commit money laundering; each carrying a maximum 20-year prison sentence.

He also was charged with conspiracy to commit commodities fraud, conspiracy to commit securities fraud, and conspiracy to defraud the United States and commit campaign finance violations; each carrying a maximum five-year sentence.

"As today's charges make clear, this was not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple," U.S. Attorney Damian Williams said.

Bankman-Fried is facing charges from three different agencies: the Justice Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

The Justice Department accused Bankman-Fried of defrauding FTX customers by misappropriating their funds for his personal use. It also said he violated campaign finance laws by making contributions in the names of other people.

The SEC alleged that Bankman-Fried "orchestrated a years-long fraud to conceal" the diversion of FTX customers' funds into his privately held crypto hedge fund Alameda Research. Bankman-Fried had raised more than $1.8 billion since May 2019.

He then used the funds at Alameda to purchase lavish real estate and make large political donations, the SEC said.

"We allege that the defendant conspired to defraud customers by misappropriating their deposits; to defraud lenders; to commit securities fraud and money laundering; and to violate campaign finance laws," U.S. Attorney General Merrick Garland said.

"As this indictment demonstrates, the U.S. Department of Justice will aggressively investigate and prosecute alleged criminal wrongdoing in the financial system and violations of federal elections laws."

According to his attorney, Bankman-Fried still is weighing his legal options after hearing the charges against him.

"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," SEC Chair Gary Gensler said in a statement.

"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."

The SEC charged Bankman-Fried with violating anti-fraud provisions of securities law and seeks injunctions against future securities law violations, meaning if convicted, he could be banned from future securities trading.

On Monday, Bankman-Fried was arrested at his Albany resort apartment in Nassau, Bahamas. He was taken into custody "without incident," according to the Royal Bahamas Police Force and was scheduled to appear in Magistrate Court in Nassau on Tuesday. He is expected to be extradited to the United States.

The charges announced Tuesday by the Commodity Futures Trading Commission include fraud in the connection with the loss of over $8 billion in FTX customer deposits.

"As defendants touted and marketed FTX.com as a model digital commodity asset platform, defendants were committing fraud to the detriment of U.S. investors and to the credibility of the digital asset markets," CFTC acting Director of Enforcement Gretchen Lowe said.

"We will work tirelessly to use the full scope of our enforcement authority to hold such fraudsters accountable."