Former FTX CEO Sam Bankman-Fried is facing criminal charges in New York, as well as allegations from the US Securities and Exchange Commission (SEC) for allegedly defrauding investors by diverting funds to a personal hedge fund.

Filed Charges

The allegations were filed against Bankman-Fried, 30, the once-famous creator of FTX, a day after his detention in the Bahamas.

A grand jury in the Southern District of New York charged Bankman-Fried with eight crimes. 

According to NBC News, these included 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 US and violate the campaign finance laws.

Misused Funds

Reports indicate that Bankman-Fried is suspected of intentionally planning a conspiracy to defraud FTX clients by misusing those customers' deposits and utilizing those funds to cover expenditures and obligations of Alameda Research. 

The Alameda Research, as stated in the indictment, is a private crypto hedge fund he controls to make investments.

The petition claims that the wire fraud against lenders and consumers began in or around 2019 and continued until November 2022.

The indictment also says that Bankman-Fried defrauded Alameda's lenders by giving them false and deceptive information about the company's financial health in exchange for loans and other assets.

Separately, the SEC pressed suit against him and his hedge fund, Alameda Research, on Tuesday, Dec. 13, in the Southern District of New York.

He also gave Alameda unique treatment, including a nearly limitless line of credit financed by its consumers and an exclusion from Federal Trade Commission (FTC) risk mitigation requirements, the SEC claimed.

The money from FTX clients in Alameda was subsequently reportedly used to finance undisclosed business investments, expensive real estate acquisitions, and significant political contributions.

Relate Story: Kevin O'Leary Loses His $15 Million FTX Salary as its Paid Spokesperson

Security Legislation Breach

Officials have said that further breaches of securities legislation in connection with the suspected wrongdoing are still under investigation.

The SEC's lawsuit accuses Bankman-Fried of breaking anti-fraud securities legislation and seeks injunctions against future breaches. If convicted, he might be prohibited from future securities trading as an individual.

The SEC stated the Commodity Futures Trading Commission (CFTC) is also prosecuting Bankman-Fried.

Bankman-Fried was detained Monday evening in Nassau after US officials filed criminal charges against him. Authorities will likely seek his extradition on Tuesday.

Prior Moves

Bahamas Prime Minister Philip Davis said its national government is investigating the company's bankruptcy.

FTX formerly received celebrity endorsements and huge sports sponsorships as a $32 billion firm. Bankman-Fried was recognized as a crypto wunderkind and substantial Democratic fundraiser.

However, like a bank run, FTX was hit last month when crypto-focused media outlet CoinDesk revealed the financials of an investment business also controlled by Bankman-Fried. 

Customers and onlookers questioned the company's loans and investments. They wondered whether the corporation could pay withdrawals.

The firm filed for bankruptcy days after Bankman-Fried resigned. He claimed he did not attempt to defraud anybody during the DealBook Summit on Nov. 30.

Also Read: CryptoWatch: Bitcoin Will Rise in 2023; FTX's Impact on Employees, Best Crypto to Buy for Christmas