US SEC charges FTX CEO SBF for all kinds of fraud and conspiracy in horror crypto-acronym day of reckoning

About 24 hours after his arrest in the Bahamas, the US Securities and Exchange Commission (SEC) has charged Samuel Bankman-Fried overnight for defrauding a stack of crypto investors out of a stack of money having sifted – apparently to their satisfaction – through the ashes of his self-immolating crypto-trading platform FTX.

That’s the platform the tween genius created with ex-Google reject Gary Wang and the very same which filed for Chapter 11 bankruptcy in the states last month, following an escalating disaster conveniently outlined (below) in some of 2022’s more spectacular dot points.

“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 Gary Gensler.

Bankman-Fried has been whacked with civil charges of ‘orchestrating a scheme to defraud equity investors in FTX,’ while the SEC says investigations ‘as to other securities law violations’ are ongoing.

And that’s just a taste of the SEC fury.

“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,” according to Gurbir S. Grewal the SEC’s top enforcer.

The US securities watchdog alleges SBF ‘concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors.’

“Today we are holding Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from investors in FTX and misusing funds belonging to FTX’s trading customers,” Gurbir S. Grewal added.

The disgraced founder of the ex-cryptocurrency exchange has already gotten himself arrested – in the home of trustworthy financiers – the Bahamas, after US prosecutors filed criminal charges against the crypto entrepreneur just hours ahead of his expected testimony at a special hearing of the US House committee on financial services.

SBF was due to ‘virtually’ provide some further colour around the collapse of FTX.

Bitcoin was already rising on the news, before the US CPI read put a further rocket under global assets.

The incredibly brief rise and fall of SBF and FTX

In June 2019 SBF and ex-Google gun Gary Wang launch the FTX platform, as both home and controller of crypto exchange FTX.com and by October 2021, secures another funding round on a mkt cap of US$25bn

Japanese giant SoftBank Group and Temasek join the feast in January 2022, adding $400m and boosting mkt cap valuation to US$32bn. FTX becomes the new home arena of the NBA’s Miami Heat, after already lending it’s cash and name to Mercedes F1 team.

Then SBF starts life as crypto’s new white knight – the confident buyer of broken crypto concepts – beginning with busted lender BlockFi for circa US$250m, then FTX offers a bailout of bankrupt crypto lender Voyager Digital. US regulators, meanwhile, report that FTX is fibbing when it says it’s insured by the US government. It’s a big fib.

Then things get interesting…

November 2: Crypto news website CoinDesk saysAlameda Research, Bankman-Fried’s crypto trading firm, is heavily dependent on FTX’s native token, FTT.

November 6: Noted SBF rival and Binance CEO Changpeng Zhao tells everyone he’s liquidating FTT holdings following the CoinDesk report.

November 7: Bankman-Fried says “FTX is fine. Assets are fine”.

November 8: Binance says it is planning a deal to acquire FTX.

November 9: Binance says it is totally not going to do that because – under the hood – FTX is a lemon.

November 10:  The run on FTX begins as the company suspends withdrawals.

November 11: 24 hours later we’re in Chapter 11 bakruptcy protection and so is FTX’s crypto trading firm Alameda Research and nearly 130 other affiliates.

Still November 11: Bankman-Fried resigns as CEO.

November 12: Reuters reports ‘at least $1bn’ of customer funds have vanished from FTX.

FTX calls them ‘unauthorised transactions’

Blockchain analytics firms estimate outflows between $473m and $659m in “suspicious circumstances”.

November 13: Bahamas securities regulators say they’re looking into it, because that’s where the whole SBF-FTX jig has been going on.

November 16: FTX reveals “severe liquidity crisis” in US filings

A court filing shows FTX’s Bahamas unit, FTX Digital Markets, is seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code.

FTX thought to have more than 1 million creditors.

Bankman-Fried is sued by investors

November 17: The US House Financial Services Committee announces hearing for like tomorrow for answers into the collapse.

November 20 – November 30: Bankman-Fried is on an ill-advised media junket, saying he’s just a dumb kid and didn’t mean to hurt anyone, promises to make it all better and says he’s ignorant in the ways of fraud.

December 12: Police arrest Bankman-Fried in the Bahamas.

December 13:  US files for extradition.

Charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, as well as heaps of conspiracy charges including de-frauding the US and violating finance campaign laws.

Sounds like he could be in trouble.