A new indictment on Tuesday alleges that Sam Bankman-Fried, co-founder of FTX, paid tens of millions of dollars in bribes to at least one Chinese government official. Federal prosecutors claim that Bankman-Fried's hedge fund, Alameda Research, had accounts targeted by a freezing order from Chinese authorities in or around November 2021.
According to the indictment, Bankman-Fried and others transferred at least $40 million in cryptocurrency to benefit one or more Chinese officials to influence and induce them to unfreeze some of the accounts. Prosecutors allege that Bankman-Fried and his associates tried several methods to unfreeze the accounts containing around $1 billion in cryptocurrency. When legal and personal efforts failed, Bankman-Fried agreed and directed a multi-million dollar bribe to unlock the frozen accounts.
The government claims that Bankman-Fried's hedge fund used the unfrozen assets to continue funding Alameda's loss-generating trades, perpetuating a fraud on customers and investors for another year. FTX and Alameda collapsed in November 2022 after concerns about their balance sheet resulted in a bank run. Bankman-Fried now faces a federal indictment and civil charges from both the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The charges suggest that the federal government has obtained new evidence about Bankman-Fried's international dealings. This comes just a day after US regulators accused the crypto exchange Binance of facilitating terrorist financing and violating US derivatives law.
As Bankman-Fried's collapsed FTX remains entangled in Delaware bankruptcy court proceedings, the allegations against him paint a picture of high-stakes bribery in the crypto industry.
The case against Bankman-Fried underscores the growing scrutiny faced by the cryptocurrency sector as regulators worldwide aim to crack down on illicit activities and enforce compliance with financial regulations. The indictment serves as a reminder of the potential pitfalls that can arise in the rapidly evolving world of digital assets, even for high-profile figures like Bankman-Fried.
As the legal battle unfolds, it remains to be seen what impact these allegations will have on the broader cryptocurrency market and whether they will lead to increased calls for tighter regulation and oversight. In the meantime, industry stakeholders and investors will be watching the proceedings closely to assess the potential ramifications for the future of the sector.
