Sam Bankman-Fried, a former chief executive of FTX, is accused of orchestrating a multi-year plan to mislead equity investors and raise more than $1.8 billion, according to a claim made on Tuesday by the US Securities and Exchange Commission (SEC).
Bankman-Fried was detained on Monday in the Bahamas, and now she faces criminal charges in the US if she is extradited.
A statement on the SEC website says that the now-defunct cryptocurrency billionaire mixed customer funds and hid risks as well as the link between FTX and its trading subsidiary, Alameda Research.
Gary Gensler, the chair of the SEC, said, “We allege that Sam Bankman-Fried erected a house of cards on a foundation of lies while telling investors that it was one of the safest structures in crypto.”
According to the regulator, Bankman-Fried allegedly used billions of dollars in consumer money to expand his other businesses. It was said that Alameda Research wasn’t subject to the risk rules of the exchange and could have a negative balance on FTX.
The SEC complaint says that Bankman-Fried personally asked that FTX’s “risk engine” not be used with Alameda and hid from investors how closely the two businesses were linked.
While attempting to plug a multi-billion-dollar hole in FTX’s balance sheet, Bankman-Fried continued to deceive investors. The regulator says that it finally stopped when FTX and Alameda filed for bankruptcy on November 11.
The SEC wants to stop Bankman-Fried from serving as an officer or director of a publicly traded firm and from selling securities like cryptocurrency. Additionally, the securities market regulator wants to compel him to surrender his assets.
