FTX’s founder and former CEO could be attending court hearings as a defendant soon.
US prosecutors are reportedly preparing for a potential fraud case against the people involved in the collapse of cryptocurrency giant FTX, including Sam Bankman-Fried.
The company floundered when customer withdrawals surged within early November, with the company strongly advising clients against depositing as they may not recover their assets, per Investopedia.
SBF Alleged Fraud Case Details
Prosecutors are allegedly investigating how SBF moved his funds outside the US as FTX approaches bankruptcy while they are preparing the groundwork for a fraud case against him and other involved people, per Bloomberg’s anonymous source.
The source requested not to be identified as they were not authorized to discuss the case publicly.
Apparently, they are closely examining whether SBF improperly transferred hundreds of millions of dollars around Nov. 11, when he filed for bankruptcy in Delaware.
The prosecutors were said to have met with FTX’s court-appointed overseers to discuss the materials needed to build a case against SBF and other involved individuals.
They are also considering if SBF broke the law by transferring huge sums of money to his bankrupt investment firm in the Bahamas and FTX’s sister company, Alameda Research, when his bankruptcy was imminent, per Engadget.
The prosecutors’ theories are not without merit. SBF previously admitted to “grievous managerial errors” as FTX’s CEO, though he strongly denied that he knowingly misused customers’ funds.
However, a report from Coindesk said that SBF said in a Coffeezilla interview that client funds weren’t segregated as promised. According to SBF’s answer to the famous YouTuber regarding the differentiation between client assets and digital assets, the withdrawals were not limited during the crash – a time when FTX leadership and SBF agreed to treat customers “equally.”
As a result of the withdrawals, fungibility was created between the exchange’s spot and derivatives business lines.
Coffeezilla found SBF’s answer to be the “smoking gun” to SBF’s fraud – the former FTX CEO previously said in the interview that the company treated client assets and digital assets differently.
SBF’s answer means that he may have sent some of FTX’s clients’ money to Alameda Research around Nov. 11.
Getting All Lawsuits In Line
US prosecutors are not the only ones looking to pick a bone with SBF and FTX as a whole. Coin Telegraph reports that there are at least seven more lawsuits in line for SBF to answer to, with many of them accusing the company’s founder of fraud.
The latest in these lawsuits accuses SBF of fraudulently inducing “unsophisticated investors” into purchasing unregistered securities by giving them yield-bearing accounts, losing billions of dollars in the process.
An earlier one says that SBF and FTX’s executives misled their customers with unfair and deceptive practices, with them claiming that FTX Entities and yield-bearing accounts were ” a viable and safe way to invest in crypto.”