Federal prosecutors are investigating the collapse of the cryptocurrency exchange FTX, which was, until recently, helmed by major Democratic donor Sam Bankman-Fried, The Wall Street Journal reported Monday, citing anonymous sources familiar with the matter.
Bankman-Fried and FTX are already under investigation by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice, over reports that FTX loaned billions of dollars worth of clients’ assets to Alameda Research, a trading house co-founded by Bankman-Fried. While the crypto market is still largely unregulated, the undisclosed use of clients’ funds has exposed Bankman-Fried, FTX and Alameda to American embezzlement and fraud laws, prompting the Manhattan U.S. attorney’s office to begin investigating, according to the WSJ. (RELATED: Crypto Billionaire And Dem Donor’s $16 Billion Fortune Evaporated In A Matter Of Days: REPORT)
“What this will boil down to is, were there deliberate lies to convince depositors or investors to part with their assets?” former Manhattan federal prosecutor Samson Enzer told the WSJ. “Were there statements made that were false, and the maker of those statements knew they were false and made with the intent to deceive the investor?”
U.S. attorneys would need to establish jurisdiction over the Bahamas-based FTX, especially considering Bankman-Fried lived in the Bahamas, according to the WSJ. However, since FTX had an American arm, FTX US, and Bankman-Fried had close ties with American regulators, prosecutors may gain jurisdiction on the grounds that parts of an alleged scheme took place on U.S. soil.
5) I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week.
I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.
— SBF (@SBF_FTX) November 11, 2022
“The burden for venue is not very high,” Enzer told the WSH “The government would argue that if a single email went through New York, that would suffice.”
FTX, Alameda and FTX US all filed for Chapter 11 bankruptcy in the United States on Nov. 11, with Bankman-Fried resigning as the CEO of FTX. On the same day, the company’s assets were frozen by Bahamian regulators.
Both the crypto exchange and erstwhile billionaire are also under investigation by the Commodities Future Trading Commission (CFTC), according to Bloomberg. Bankman-Fried donated hundreds of thousands of his own dollars to congressional candidates in the Senate and House Agriculture Committees, the congressional bodies that oversee the CTFC.
He also donated more than $27 million to the Democrat-aligned Protect Our Future PAC which in turn spent $1 million on Democratic Rep. Shontel Brown of Ohio, a member of the House Agriculture Committee. American Dream Federal Action, a political action committee founded by FTX executive Ryan Salame, spent more than $2 million combined on the Senate committee’s ranking Republican Sen. John Boozman of Arkansas and Republican Rep. Brad Finstad of Minnesota, a member of the House committee.
The Second District of New York U.S. Attorney’s Office and FTX did not immediately respond to a Daily Caller News Foundation request for comment.
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