Sam Bankman-Fried fooled investors and customers by presenting himself as the J.P. Morgan of a new crypto world. But a lawsuit filed by the Securities and Exchange Commission on Tuesday alleges he was really Bernie Madoff all along. The explosive suit alleges that Bankman-Fried’s FTX crypto currency exchange was a fraud right from the start when it was founded in 2019, which he used as his own personal piggy bank to fund his hedge fund Alameda Research’s extremely risky trading moves.
The SEC alleges that Alameda was given a “virtually unlimited line of credit funded by the platform’s customers,” despite assuring depositors that their money was safe and secure. He is also accused of lying to investors and the public by claiming to run a conservative investment business with sophisticated risk measures and that Alameda had no special privileges above anyone else. Instead, Bankman-Fried spent lavishly on office spaces and luxury apartments in the Bahamas where his companies were based, as well as on speculative venture investments and political donations. “FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by,” said Gurbir Grewal, director of the SEC’s division of enforcement. ”But as we allege in …