U.S. regulators filed civil securities fraud charges on Tuesday against Sam Bankman-Fried, the founder of the collapsed FTX crypto exchange, who was arrested on Monday night at his home in the Bahamas.
The Securities and Exchange Commission charged him with misleading big investors, who committed nearly $2 billion to FTX in recent years, about the financial health of the crypto exchange and its sister crypto trading platform, Alameda Research.
The S.E.C. also said that Mr. Bankman-Fried misled customers by taking in billions of dollars to trade crypto on FTX and telling them it was safe. But the S.E.C. said that money from customers was commingled with funds at Alameda and used to finance investments in outside ventures, buy real estate and make 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,” the S.E.C. chair, Gary Gensler, said in a statement.
The S.E.C.’s civil complaint said Mr. Bankman-Fried “was orchestrating a massive, yearslong fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”
Federal prosecutors in Manhattan are expected to unseal a criminal indictment against Mr. Bankman-Fried on Tuesday, which is expected to charge him with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.
The collapse of the FTX empire shocked the crypto world and has caused many investors to get to grips with not just the volatility of crypto assets but the security and safety of the platforms that crypto is traded on. FTX was one of the biggest exchanges in the world and spent extensively on advertising and marketing.
Representatives for Mr. Bankman-Fried were not immediately available for comment.