Recall that the FTX founder’s situation is now very bad. He was taken up not only by the Office of the Attorney for the Southern District of New York, but also other agencies, including the Securities and Exchange Commission (SEC). A total of eight charges have been brought against Bankman-Fried, including “defrauding the US”. All of which could carry up to 165 years in prison.

FTX Arena

Why has FTX gone bankrupt?

One of the main points from the SEC announcement is that fraudulent activity within Sam’s “crypto empire” had been going on practically since day one of its founding. FTX customer funds were misused and often passed on to Alameda Research, i.e. the trading firm also founded by Bankman-Fried.

According to The Block’s sources, Sam consistently claimed that there were no special privileges behind Alameda Research. SEC officials refute this in a recent announcement.

In fact, Bankman-Fried exempted Alameda from risk mitigation measures and gave the firm significant powers of access to FTX, including a virtually unlimited “line of credit” funded by the platform’s clients.

As it later emerged, Alameda representatives were not paying interest on its own loans of the equivalent of billions of dollars. Accordingly, FTX and its users' funds were essentially an unlimited source of finance for Sam's fellow traders at a related company.

Ex-CEO of FTX Sam Bankman-Fried

What’s more, exchange client funds sometimes found their way to Alameda through bank accounts that unofficially belonged to the trading firm. That is, Sam’s team among other things tried to hide some of the financial flows between FTX and Alameda. Alameda’s multi-billion dollar liabilities to the exchange were stored in an internal account in the FTX database called [email protected].

Another interesting fact is that FTX had an “advanced” risk control system that controlled the exchange’s financial flows. Bankman-Fried actively promoted it before the US House Financial Services Committee and the Commodity Futures Trading Commission (CFTC). But the system had one interesting detail: it excluded Alameda Research, one of FTX’s main “clients” on the flow of funds.

Some of the money went directly to Sam and his team. Bankman-Fried, as well as top executives Gary Wang and Nishad Singh, borrowed almost $2.2 billion from Alameda’s mixed funds. Part of the amount was used to buy real estate in the Bahamas and political lobbying in the US. And some of these loans were made in mid-2022, when FTX was already in dire financial straits. The loans were often poorly documented and sometimes did not appear on the company’s financial statements at all.

Alameda Research

The agency also said that it was Sam who made most of the decisions regarding Alameda’s operations. Meanwhile, Bankman-Fried earlier insisted he was not the head of the trading company, so he was not aware of what was going on at the company. Here’s a quote.

Bankman-Fried continued to make decisions at Alameda, even after Ellison and Trabucco took over as CEO around October 2021. Bankman-Fried managed investment and operational decisions, communicated frequently with Alameda employees and had full access to all records and databases

Former Alameda Research executive Caroline Ellison

All of this is just part of what the SEC experts were able to find out from the preliminary investigation. More interesting details are likely to emerge in the near future. That said, the current list of charges against Bunkman-Fried is already enough to put him behind bars for years to come. The only problem is that even a life sentence for Sam will do nothing to speed up the compensation of affected FTX customers. As lawyers have previously reported, there’s a chance that it could take decades for them to get their own money back, which in principle is already happening with the once-popular crypto-exchange Mt.Gox.


We think that the future fate of Sam Bankman-Fried is already clear: after all, due to the abundance of attention from various authorities and regulators, he is unlikely to escape punishment any longer. The only question here is how long it will take the prosecution to investigate all the details of the case. Obviously, it could be weeks or months.