The Wall Street Journal (WSJ) reports FTX CEO Sam “SBF” Bankman-Fried could face criminal charges from United States prosecutors. The Manhattan US Attorney’s office is investigating FTX’s misuse of investor funds, lending them to sister company Alameda Research. Additionally, CNN reports at least $1 billion of user funds is missing from the $10 billion lent to Alameda Research. Could SBF face jail time for his role in the collapse of FTX?
FTX lent $10 billion in user assets to Alameda Research.
The debacle at the heart of the matter is the user assets SBF transferred from FTX to cover Alameda Research. The meltdown began when Binance’s CEO, Changpeng “CZ” Zhao, noticed FTX’s native token, FTT, made up most of Alameda’s assets. Allegedly, SBF transferred $10 billion of FTX’s $16 billion in user assets to Alameda Research to use as collateral for loans. According to CNN, internal spreadsheets show between $1 and $2 billion are missing from Alameda’s assets.
According to Reuters, the Securities Exchange Commission is investigating FTX’s use of customer funds and lending activities. Additionally, the Department of Justice and Commodity Futures Trading Commission are also looking into the matter.
Did FTX CEO Sam Bankman-Fried deliberately defraud users?
Prosecutors have a few hurdles before they can charge SBF with a crime. First, they have a case if they can prove that SBF knowingly lied to FTX users or investors. According to WSJ, prosecutors will likely use SBF’s now-deleted tweets saying FTX was “fine” and user assets were completely covered.
Additionally, prosecutors have to show they have jurisdiction over the now-bankrupt crypto exchange based in the Bahamas. Although, according to former federal prosecutor Samson Enzer, authorities shouldn’t have much trouble proving jurisdiction. He said, “The government would argue that if a single email went through New York, that would suffice.”
SBF and other FTX execs are “under supervision” in the Bahamas.
Cointelegraph reports Bankman-Fried, FTX co-founder Gary Wang, and director of Engineering Nishad Singh are “under supervision” in the Bahamas. The trio allegedly tried to flee to Dubai but was detained by authorities. Additionally, Alameda Research CEO Caroline Ellison also tried to reach Dubai from Hong Kong.