The CFTC is suing Bankman-Fried, FTX and Alameda for violating commodity laws

The US Commodity Futures Trading Commission (CFTC) today announced a lawsuit against cryptocurrency exchange founder Sam Bankman-Fried for alleged violations of federal commodity laws.

The other defendants named in the complaint are FTX and its subsidiary, Alameda Research.

The US derivatives regulator alleges that Bankman-Fried and other FTX executives obtained hundreds of millions of dollars in loans from Alameda and used the funds to purchase real estate and make donations to politicians.

“At Bankman-Fried’s direction, FTX executives created features in the underlying code of FTX that allowed Alameda to maintain an essentially unlimited line of credit on FTX,” reads the complaint filed Tuesday in Manhattan federal court.

The CFTC also alleges that FTX executives “created other exceptions to standard FTX processes that allowed Alameda to gain an unfair advantage in transactions on the platform, including faster execution times and an exception to the platform’s signature automatic liquidation risk management process.”

Bankman-Fried, 30, was arrested Monday at his home in the Bahamas, where FTX is headquartered, ahead of a possible legal battle over whether he should be extradited to the United States.

FTX “House of Cards”

The CFTC isn’t the only one going after the SBF.

On Monday, the U.S. Attorney’s Office for the Southern District of New York indicted the founder of FTX on multiple criminal charges, including conspiracy to defraud, conspiracy to defraud the United States, and violating campaign finance laws.

Earlier Tuesday, the U.S. Securities and Exchange Commission (SEC) formally mandated SBF to “organize a scheme to defraud equity investors in FTX Trading Ltd. (FTX).”

“We claim that Sam Bankman-Fried built a fraudulent house of cards while telling investors it was one of the safest buildings in cryptocurrency,” said Gary Gensler, Chairman of the SEC. “The alleged fraud that Mr. Bankman-Fried pledged is a clear call to crypto platforms that they need to comply with our laws.”

According to Gurbir Grewal, director of enforcement at the SEC, FTX “operated behind a veil of legality” that was not only thin, but fraudulent. “

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