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Charges against former FTX CEO have been unsealed

ARI SHAPIRO, HOST:

The now-disgraced golden boy of crypto was arrested at the request of the U.S. government at his home in the Bahamas last night. And today we learned that Sam Bankman-Fried faces more than half a dozen criminal charges related to the collapse of his crypto empire and civil charges from financial regulators.

NPR's David Gura is following this fast-moving case. And, David, a lot of pieces of this story have fallen into place in the last 24 hours. What's the picture that emerges when you put them all together?

DAVID GURA, BYLINE: Well, what we have from prosecutors is a portrait of somebody who seemed to have had no hesitation taking customers' money to finance his own investments. And they allege he also used customers' money to buy luxury real estate, to make campaign contributions and to try to plug holes that kept getting bigger and bigger as we saw this huge drop in the value of cryptocurrencies earlier this year. Gary Gensler, the chair of the SEC, the Securities and Exchange Commission, said Bankman-Fried, quote, "built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto."

And you know, Ari, there's another picture that's emerging. It's one of a very aggressive, very fierce government response. Remember, it was just a month ago Bankman-Fried stepped down and FTX filed for bankruptcy. Well, prosecutors seem pretty outraged by the number of people who may be victims of fraud here and by the amount of money that seems to have just disappeared. So far, FTX says it can't find $8 billion. So this is shaping up to be a big battle for law enforcement and for regulators, Ari. And it's one they very clearly want to win.

SHAPIRO: What are they most concerned about? What are the biggest charges?

GURA: Bankman-Fried is accused of defrauding investors in FTX and customers, many of whom were small-time individual investors. And Bankman-Fried, who is a big political donor, has also been charged with violating campaign finance laws. You know, a lots been made of the sprawling nature of FTX and the complexity of crypto. Well, at a news conference this afternoon, Michael Driscoll, the FBI assistant director in charge of this case, said none of that matters.

(SOUNDBITE OF ARCHIVED RECORDING)

MICHAEL DRISCOLL: This case is about fraud. Fraud is fraud. It does not matter the complexity of the investment scheme. It does not matter the amount of money involved. If you mislead and deceive to take what does not belong to you, we will hold you accountable.

GURA: Now, Bankman-Fried faces some serious charges here. And this is the type of case that could land a person in prison for decades. At the heart of this indictment and of the complaints from regulators is this cozy relationship between FTX and Bankman-Fried's private crypto hedge fund. It was called Alameda Research. What's alleged is there was no wall whatsoever between these two institutions. Bankman-Fried was integrally involved in both of them. And money from FTX customers was used to pay Alameda's debts, to pay its bills, really to keep it afloat. Well, the SEC says there was no meaningful distinction between FTX customer funds and Alameda's own funds, and Bankman-Fried used Alameda as, quote, "his personal piggy bank."

SHAPIRO: You know, Sam Bankman-Fried was pretty talkative in the days leading up to his arrest. Now given the seriousness of these accusations, how has he been handling things?

GURA: Yeah. He appeared in a courtroom today in the Bahamas, where FTX is headquartered, and negotiations started over his bail and his extradition. Bankman-Fried was supposed to testify before Congress today at a hearing on the collapse. And that hearing before the House Financial Services Committee went on without him. It was our first chance to hear from John Ray, the new CEO of FTX, and he painted a bleak picture of the work ahead for himself.

(SOUNDBITE OF ARCHIVED RECORDING)

JOHN RAY: I've just never seen an utter lack of record keeping, absolutely no internal controls whatsoever.

GURA: As for Bankman-Fried, his lawyer said in a one-sentence statement Bankman-Fried is, quote, "reviewing the charges with his legal team and considering all of his legal options." Meanwhile, the investigations continue. And at his news conference this afternoon, Ari, U.S. Attorney Damian Williams spoke directly to people who may have participated in the activities that led to FTX's implosion. I would strongly encourage you to come see us, he said, before we come see you.

SHAPIRO: NPR's David Gura. Thanks a lot.

GURA: Thanks, Ari. Transcript provided by NPR, Copyright NPR.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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