The US government says it was fraud from the start. The complaint made public today by the Commodity Futures Trading Commission contains some chilling details – and if true, Sam Bankman-Fried hasn’t been telling the truth in quite some time. For example, according to the complaint, Bankman-Fried operated Alameda Research and FTX as a joint venture. This complaint is civil law.
Speaking at a news conference today, U.S. attorney Damian Williams characterized Alameda Research and FTX as “one of the greatest financial frauds in U.S. history.”
Sam Bankman-Fried was heavily involved with Alameda Research
Bankman-Fried said he “didn’t really know what was going on” at Alameda Research and that he was “not running Alameda.” According to the CFTC indictment, that’s not even remotely true. It says that Bankman-Fried was a signatory to Alameda’s bank accounts and was an “authorized trader for Alameda’s accounts with CFTC futures commission traders.” He also had direct authority “over all of Alameda’s major trade, investment, and financial decisions.” He called senior Alameda personnel in person and via “mobile chat communications”.
From May 2019 through November 11, 2022, FTX customer deposits — including both fiat currencies and cryptocurrencies such as Bitcoin and Ethereum — were regularly held “and/or appropriated” by Alameda for its own use, the complaint alleges. Only a small circle of insiders knew that. Alameda merchants could tap an “essentially unlimited” line of credit on FTX, and there were special exceptions to FTX’s usual processes that gave Alameda faster execution times than anyone else.
Still, Bankman-Fried wanted the world to think there was a stark separation between the two entities, the indictment says. That was a major motivator for his resignation as CEO of Alameda.
But wait! There is more! As FTX was on the brink of collapse, Alameda Research traders were instructed to sell everything quickly and “generally do everything possible to quickly get billions of dollars in capital to send to FTX,” according to CFTC’s complaint. When a trader summarized this guideline to him, Bankman-Fried confirmed it. He also said “‘there is certainly a fair amount of urgency’ and asked for the ‘ETA to get at least $2 billion in USD’,” the indictment said.
When FTX executives discovered a shortfall in FTX US, according to the complaint, Bankman-Fried said he would fill the gap with Alameda Research assets, and on Nov. 8, Bankman-Fried instructed Alameda traders to prioritize the meet the capital requirements of FTX US and to send excess capital to FTX US. Alameda sent more than $185 million to cover the shortfall, the complaint says.
Alameda and FTX were intertwined on a software and hardware level
While Caroline Ellison, CEO of Alameda, previously stated that she and Bankman-Fried keep the two companies “quite separate in terms of day-to-day operations,” the CFTC makes a pretty strong argument indicating that this, too, could be false.
Bankman-Fried and other senior executives at both Alameda and FTX are accused of “widespread access to each other’s systems and accounts.”
Both teams shared office spaces, as well as “key personnel, technology and hardware, intellectual property and other resources,” the indictment said.
FTX and Alameda mixed and traded client funds
In an interview on The New York Times’ DealBook Summit, Bankman-Fried said, “I did not deliberately mix money” between FTX and Alameda. The government thinks otherwise.
When Bankman-Fried launched FTX, customers who wanted to send fiat currency to their FTX accounts were told to transfer their funds to Alameda Research. Those funds were not kept separate from Alameda’s money, or in accounts labeled “on behalf of” FTX customers, the complaint said. The Alameda accounts that held FTX money were labeled “fiat@ftx” on FTX’s internal ledger system.
The agency also alleged a long-standing pattern of Alameda and FTX sub-funds. “Alameda accessed and used FTX client funds for Alameda’s own operations and activities, including to fund its trading, investing and borrowing/lending activities,” the complaint said.
Alameda is not only accused of using money transferred to her own bank accounts. According to the SEC, it had the ability to withdraw unlimited funds from its FTX trading account and tap into digital assets there as well.
Bankman-Fried (and his parents) used client money for private jets and a lot of other things
The CFTC alleges that Bankman-Fried, his parents and his employees at FTX and Alameda used client money for personal gain: luxury real estate, private jets, personal loans and political donations. The client’s money was also used for a Super Bowl commercial starring Larry David and the sponsorship of Miami’s FTX Arena. These ads, which the CFTC says were paid for with customers’ money, said FTX was “the safest and easiest way to buy and sell crypto”.
FTX’s terms of service were lies
FTX’s terms of service said that none of the digital assets in a user’s account “shall or may be lent to FTX Trading.” According to the CFTC indictment, that was a lie. The use of customer funds was not authorized by FTX customers and they were unaware that their funds were being used by Alameda Research, the complaint said.
The CFTC’s complaint also indicates that Bankman-Fried may have lied to Congress about FTX’s terms of service during his appearance on February 9, 2022. its own assets on all our platforms.”
Bankman-Fried has made “tens of millions” of dollars in political donations using customer money, authorities say
Bankman-Fried’s reputation as a liberal do-gooder was largely based on his generous donations to Democrats and progressive groups. But in its indictment, published Tuesday, New York’s Southern District Court charged SBF with violating multiple campaign finance laws during his last three years at FTX.
Specifically, U.S. Attorney Damian Williams said at a press conference on Tuesday that SBF’s contributions were “disguised to look like they came from wealthy co-conspirators, when in fact the contributions were funded by Alameda Research’s stolen client money.” .”