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CFTC Follows SEC by Filing a Lawsuit Against Disgraced FTX Co-Founder Sam Bankman-Fried

  • Business

On Dec. 13, 2022, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Sam Bankman-Fried (SBF), FTX Trading LTD., and Alameda Research. The CFTC alleges that FTX customer deposits, “throughout the relevant period,” including both fiat currencies and cryptocurrencies, were reportedly “appropriated by Alameda for its own use.”

U.S. Commodity Futures Trading Commission: ‘FTX and Alameda Comingled, Mishandled, and Misappropriated FTX Trading Customer Funds’ From Day One

The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit (Case 1:22-cv-10503) against SBF and his companies FTX and Alameda Research. The lawsuit claims that “at Bankman-Fried’s direction, FTX executives created features in the underlying code for FTX that allowed Alameda to maintain an essentially unlimited line of credit on FTX.”

The CFTC alleges that SBF and his inner circle “took hundreds of millions of dollars” in loans from Alameda and used the funds for Bahamian real estate, “political donations, and for other unauthorized uses.”

The CFTC’s court filing insists:

Through this conduct and the conduct further described herein, [the] defendants violated Section 6(c)(1) of the Commodity Exchange Act.

The U.S. commodities regulator is seeking “civil monetary penalties and remedial ancillary relief.” Furthermore, like the recent SEC charges, the CFTC wants SBF banned from trading activities. The CFTC believes it has jurisdiction over SBF, as Bankman-Fried is a U.S. citizen who has resided in various locations worldwide. SBF and his companies have conducted business dealings in the U.S. as well for a “relevant period,” the CFTC court document declares. For instance, Alameda Research is a Delaware limited liability company registered in the United States.

“The FTX Enterprise failed to observe corporate formalities, including failure to segregate funds, operations, resources, and personnel, or to properly document intercompany transfers or funds and other resources,” the CFTC lawsuit alleges. “The entities regularly shared office space, systems, accounts, and communications channels. On information and belief, assets flowed freely between the FTX Enterprise entities, often without documentation or effective tracking,” the court document adds.

The U.S. CFTC court document further states:

FTX and Alameda comingled, mishandled, and misappropriated FTX Trading customer funds from the moment of FTX’s launch.

The recently published charges stemming from the U.S. Securities and Exchange Commission (SEC) on Dec. 13, also indicate that the SEC believes the FTX fraud began from day one. The SEC charges are similar to the CFTC’s lawsuit, as both complaints note that Alameda allegedly had an “unlimited” line of credit that derived from FTX and essentially customer funds. In addition to the CFTC, the Southern District of New York’s Attorney’s office indicted SBF with eight counts of financial crimes charges.