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U.S. authorities charged disgraced former FTX CEO Sam Bankman-Fried with fraud a month after the crypto exchange he founded filed for bankruptcy protection.

An eight-count indictment from the Southern District of New York court accused Bankman-Fried with committing or conspiring to commit fraud on FTX’s customers and lenders, money laundering and conspiracy to defraud the United States and violate campaign finance disclosure laws. The indictment follows civil charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission. 

The indictment document claims the detained former CEO “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.”

The charges punctuate a rapid collapse for FTX that shook the crypto industry and destroyed Bankman-Fried’s reputation — while leaving hundreds of thousands of the exchange’s customers out of pocket. Bankman-Fried was arrested yesterday in the Bahamas, a day before he was scheduled to testify virtually before a House Financial Services Committee hearing into his company’s collapse. 

“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” Mark S. Cohen, counsel to Bankman-Fried, said in a statement to The Block.

Campaign finance

The campaign finance allegations accused Bankman-Fried of making “corporate contributions to candidates and committees in the Southern District of New York that were reported in the name of another person,” straw contributions meant to evade campaign finance disclosure laws. 

The charges came after a U.S. campaign watchdog accused Bankman-Fried of violating federal election laws last Thursday after he claimed in an interview last month that he secretly donated additional millions to candidates and political action committees than he disclosed. 

In the last two years, Bankman-Fried fraudulently undermined “the Federal Election Commission’s function to administer federal law concerning source and amount restrictions in federal elections,” according to the indictments. 

‘Free rein’

Bankman-Fried and his top lieutenants had “free rein” over FTX and Alameda, new FTX CEO John Ray told U.S. lawmakers at a congressional hearing today. 

“Frankly I was looked forward to getting his lies here on the record under oath,” said U.S. Congressman Patrick McHenry, opening the House committee’s hearing. “Nevertheless the arrest of Sam Bankman-Fried is welcome news.”

The SDNY announced it will hold a press conference at 2 p.m. ET to address the indictment.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.