CFTC Sues Sam Bankman-Fried, Alameda Research for Fraud

In a filing, the regulator says Bankman-Fried misrepresented the health of his companies, impacting the price of bitcoin and ether.

AccessTimeIconDec 13, 2022 at 2:05 p.m. UTC
Updated Dec 13, 2022 at 5:21 p.m. UTC

U.S derivatives regulator Commodity Futures Trading Commission (CFTC) is suing the founder of bankrupt crypto exchange FTX, Sam Bankman-Fried, and trading arm Alameda Research, according to a press release.

The suit comes after the U.S. Securities and Exchange Commission (SEC) filed charges against Bankman-Fried for defrauding FTX investors.

In its filing, the CFTC said Bankman-Fried had made misleading statements about the health of his companies and the user of customer funds, conduct which had had a “significant price impact” on commodities such as bitcoin (BTC) and ether (ETH).

The document repeats SEC allegations that Bankman-Fried had inappropriately mixed customer assets and blurred the line between Alameda and FTX, with money spent on private jets and “furtively” used to to pay for a Super Bowl ad and sports stadium sponsorship.

“The use of customer funds by Alameda was not authorized by FTX customers, and FTX customers were not made aware that their funds were being used by Alameda,” the filing said, adding that this contradicts both best practices for derivatives exchanges and contractual terms of service.

In mid-2022, after a crash in crypto markets that saw the likes of Terra and Celsius Network collapse, Bankman-Fried’s companies “portrayed that they remained highly profitable and liquid” in public, despite Alameda’s liability to FTX outstripping the latter’s total lifetime revenue, the document said.

But rosy public statements about profits contradicted what Bankman-Fried really knew, the CFTC alleged. In September, Bankman-Fried drafted a never-published document saying Alameda should be shut down permanently because it didn’t make enough money from trading, the filing said.

The CFTC was not immediately available for comment.

Bloomberg initially reported on news of the lawsuit.

UPDATE (Dec 13, 15:10 UTC): Adds details from filing.

UPDATE (Dec 13, 16:17 UTC): Removes "report" from headline and confirms filing.


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