CFTC files lawsuit against the co-founder of crypto exchange FTX Sam Bankman-Fried

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Wed, 22 Mar 2023, 12:33 PM
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CFTC files lawsuit against the co-founder of crypto exchange FTX Sam Bankman-Fried

The regulator alleges that Bankman-Fried and his inner circle took loans from Alameda amounting to hundreds of millions of dollars.

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Wed, 14 Dec 2022, 06:00 am UTC

The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Sam Bankman-Fried (SBF), FTX Trading LTD., and Alameda Research, around a month after the crypto exchange filed for bankruptcy in November 11. The CFTC alleges that customer deposits in both fiat and crypto were “appropriated by Alameda for its own use.”

The CFTC filed a lawsuit (Case 1:22-cv-10503) on December 13, 2022, against SBF and his companies FTX and Alameda Research. In its filing, the regulator claims that “at Bankman-Fried’s direction, FTX executives created features in the underlying code for FTX that allowed Alameda to maintain an essentially unlimited line of credit on FTX,” Bitcoin.com reported.

The regulator also alleges that Bankman-Fried and his inner circle took loans from Alameda amounting to hundreds of millions of dollars. The funds were then reportedly used to acquire real estate properties in the Bahamas, “political donations, and for other unauthorized uses.”

“Through this conduct and the conduct further described herein, [the] defendants violated Section 6(c)(1) of the Commodity Exchange Act,” CFTC said in its court filing.

The CFTC wants Bankman-Fried banned from trading activities and is seeking “civil monetary penalties and remedial ancillary relief.” The regulator said that it has jurisdiction over SBF as he is a U.S. citizen while his companies have conducted business dealings in the U.S. as well for a “relevant period.”

“The FTX Enterprise failed to observe corporate formalities, including failure to segregate funds, operations, resources, and personnel, or to properly document intercompany transfers or funds and other resources,” the CFTC stated in the lawsuit. “The entities regularly shared office space, systems, accounts, and communications channels. On information and belief, assets flowed freely between the FTX Enterprise entities, often without documentation or effective tracking.”

“FTX and Alameda comingled, mishandled, and misappropriated FTX Trading customer funds from the moment of FTX’s launch,” the regulator added.

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