Posted on December 11, 2022
- CFTC: “FTX and Alameda Mixed, Mishandled, and Misappropriated FTX Trading Client Funds” From Day One
the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Sam Bankman-Fried (SBF), FTX Trading LTD., and Alameda Research. According to the CFTC, FTX customer deposits, including both fiat and cryptocurrencies, were reportedly “misappropriated by Alameda for its own use” “throughout the relevant period.”
CFTC: “FTX and Alameda Mixed, Mishandled, and Misappropriated FTX Trading Client Funds” From Day One
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against SBF and its companies FTX and Alameda Research (Case 1:22-cv-10503). “Under Bankman-Fried’s direction, FTX executives created functionality in FTX’s underlying code that enabled Alameda to maintain a substantially unlimited line of credit on FTX,” the lawsuit said.
SBF and its inner circle borrowed “hundreds of millions of dollars” from Alameda and used those funds for Bahamian real estate, “political contributions and other unauthorized uses,” the CFTC said.
The CFTC court filing insists:
Through this behavior and the behavior described further in this paper, [the] Defendant 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, as with the recent SEC charges, the CFTC wants to bar SBF from trading activities. The CFTC believes it has jurisdiction over SBF because Bankman-Fried is a US citizen who has lived around the world. SBF and his companies also conducted business transactions in the United States “at the relevant time,” the CFTC court filing said. For example, Alameda Research is a Delaware limited liability company incorporated in the United States.
“FTX Enterprise failed to comply with corporate formalities, including failing to segregate funds, operations, resources, and personnel, or failing to properly record intercompany transfers or funds and other resources,” the CFTC lawsuit said. “These entities regularly shared office space, systems, accounts, and communication channels. Based on information and belief, assets flowed freely among the FTX Enterprise entities, often without documentation or effective tracking,” the court filing added.
The U.S. CFTC court document further states:
FTX and Alameda have mixed, mishandled, and misappropriated funds of FTX Trading clients from the moment FTX launched.
The recently unsealed charges from the US Securities and Exchange Commission (SEC), published on Dec. 13, also suggest that the SEC believes that FTX’s fraud began from day one. The SEC’s allegations are similar to the CFTC’s suit, as both lawsuits state that Alameda allegedly had an “unlimited” line of credit originating from FTX that was essentially client money. In addition to the CFTC, the U.S. Attorney’s Office for the Southern District of New York indicted SBF on eight counts of financial crimes.
What do you think of the CFTC’s lawsuit against FTX and Sam Bankman-Fried? Let us know your thoughts on this topic in the comments section below.
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