U.S. prosecutors charge FTX founder Sam Bankman-Fried with eight counts of fraud and conspiracy;
The indictment, brought by the U.S. attorney’s office for the Southern District of New York, accuses him of misappropriating FTX.com customers.
Mark Cohen, a lawyer for Mr. Bankman-Fried, said in a statement that his client “is reviewing the charges with his legal team and considering all of his legal options.”
Also on Tuesday, the Securities and Exchange Commission and the Commodity Futures Trading Commission sued Mr. Bankman-Fried for fraud.
The SEC alleged in its lawsuit that Mr. Bankman-Fried diverted customer funds from the start of his cryptocurrency exchange to support his hedge fund, Alameda Research, and to make venture investments, real-estate purchases and political donations.
The arrest Monday and the charges are the latest bombshells in a case that has transfixed Wall Street and Washington. FTX, one of the largest crypto exchanges in the world, filed for bankruptcy last month after it ran out of cash and rival Binance walked away from a shotgun merger.
John J. Ray III, the new chief executive of FTX, is testifying at a congressional hearing about the bankrupt crypto exchange. It is his first public comments about the collapse.
FTX incurred losses “in excess of $7 billion,” said John J. Ray III, FTX’s new chief executive, in a congressional hearing probing the collapse of crypto exchange FTX on Tuesday.
Mr. Ray said funds were taken from FTX and misused by its affiliate trading firm Alameda Research, which incurred trading losses.
The CFTC said while institutional customers had their orders routed through the FTX system, Alameda was able “to bypass certain portions of the system and gain faster access.” It resulted in transaction orders being received several milliseconds faster than of other institutional clients.
The lawsuit also alleges Alameda wasn’t subject to certain automated verification processes, including on whether it had available funds before executing a transaction, giving it further advantage on the speed of its trades.
The allegations add to a series of others made against Mr. Bankman-Fried, FTX’s founder, on Tuesday by the CFTC, the Securities and Exchange Commission and federal prosecutors.
