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‘We are not done,’ the US attorney claims, in prosecuting people for the collapse of FTX

On Tuesday afternoon, several U.S. federal agencies convened a news conference to discuss the indictment of Sam Bankman-Fried, the former CEO of FTX.

During the occasion, Damian Williams, the U.S. attorney for the Southern District of New York, was asked whether the entities will file charges against more persons allegedly engaged in the FTX collapse. He said, “I can only say this: Clearly, we are not done.”

The U.S. attorney’s office, the SEC, and the CFTC had all filed accusations against Bankman-Fried earlier in the day, and the meeting was held many hours after the charges were filed.

In the wake of Bankman-arrest Fried’s in the Bahamas on Monday evening, this event occurred. Gurbir Grewal, head of the SEC’s division of enforcement, said at the conference that the SEC has accused Bankman-Fried for an alleged “years-long plan to mislead investors in FTX.” More possible securities law breaches by Bankman-Fried are being looked into. Charges were brought against him in “parallel proceedings” by the CFTC and the U.S. attorney’s office.

Williams would not reveal who among the FTX employees has helped investigators so far, but he urged anybody who hasn’t “to do so and do it immediately.”

“As alleged in our complaint, starting in 2019 continuing through November 2022, Bankman-Fried raised more than $1.8 billion from equity investors on the basis of lies,” Grewal said. “FTX operated behind a veneer of legitimacy that Bankman-Fried created among other things … but as we allege in our complaint, that veneer wasn’t just thin, it was also fraudulent.”

According to Grewal, Bankman-Fried has been illegally syphoning off consumer monies to his crypto hedge fund, Alameda Research, since since FTX launched in 2019. He then allegedly utilised the money for “undisclosed enterprise investments,” “lush real estate acquisitions,” and “large political contributions,” as stated in the lawsuit.

It’s hard to compare these things, but this is one of the largest financial scams in American history,” Williams remarked when asked at the conference whether the FTX collapse is comparable to what occurred with the Bernie Madoff Ponzi scheme.

Bankman-claims Fried’s that the cryptocurrency exchange had “advanced risk controls and other consumer safeguards” were “just untrue,” according to Grewal.

Alameda was “simply another consumer with no special benefits,” Grewal added. However, “[he] supplied Alameda with almost a limitless line of credit paid by FTX consumers and he also moved billions of dollars of client monies from FTX to Alameda.”

The lesson that FTX’s collapse taught Grewal was straightforward: non-compliant trading platforms provide severe dangers to both investors and clients.

“Among other things, they don’t provide them with the same robust level of disclosures and protections against fraud and conflicts of interest. That’s what traditional U.S.-registered exchanges provide, so it’s imperative that non-compliant platforms come into compliance.”

“The runway is getting shorter for them to come in and register with us,” Grewal said. “For those who do not, the enforcement division is ready to take action.”

Separately, on Tuesday morning the House Financial Services Committee in the United States convened a hearing dedicated to the demise of FTX. Many concerns were left unanswered during the four-hour session, but certain points from new FTX CEO John J. Ray III’s statement stuck out.