The US government says it was fraud from the jump. The complaint made public today by the Commodity Futures Trading Commission has some hair-raising details — and if it’s right, Sam Bankman-Fried hasn’t been telling the truth for quite some time. According to the complaint, Bankman-Fried operated Alameda Research and FTX as a common enterprise, for instance. This complaint is civil.
In a press conference today, US attorney Damian Williams characterized Alameda Research and FTX as “one of the biggest financial frauds in American history.”
Bankman-Fried said that he “didn’t know exactly what was going on” at Alameda Research and that he “wasn’t running Alameda.” According to the CFTC complaint, that’s not even a little true. It says that Bankman-Fried was a signatory on Alameda’s bank accounts, and was an “authorized trader for Alameda’s accounts with CFTC futures commissions merchants.” He also had direct authority “over all of Alameda’s major trading, investment, and financial decisions.” He made calls in person and over “mobile chat communications” with senior Alameda personnel.
From May 2019 through November 11th, 2022, FTX customer deposits — including both fiat currency and cryptocurrencies such as Bitcoin and Ethereum — were regularly held by “and / or appropriated” by Alameda for its own use, the complaint alleges. Only a small circle of insiders knew that. Alameda traders could tap an “essentially unlimited” line of credit on FTX, and there were special exceptions to FTX’s usual processes that gave Alameda faster execution times than everyone else.
Still, Bankman-Fried wanted the world to think there was a strong separation between the two entities, the complaint says. That was a major motivator for his resignation as the CEO of Alameda.
But wait! There’s more! When FTX was on the verge of collapse, Alameda Research’s traders were instructed to sell everything, fast, and “generally do anything possible to quickly obtain billions of dollars in capital to send to FTX,” the CFTC complaint says. When a trader summarized this directive to him, Bankman-Fried confirmed it. He also said “‘there is definitely a fair bit of urgency’ and asked for the ‘ETA on getting at least $2b of USD,”” according to the complaint.
When FTX executives found a shortfall in FTX US, according to the complaint, Bankman-Fried said he would fill the hole using Alameda Research’s assets, and on November 8th, “Bankman-Fried directed Alameda traders to prioritize meeting FTX US capital requirements and to send excess capital to FTX US.” Alameda sent more than $185 million to cover the shortfall, the complaint says.
Although Alameda CEO Caroline Ellison previously stated that she and Bankman-Fried keep the two companies “quite separate in terms of day-to-day operations,” the CFTC makes a pretty strong argument indicating that this, too, could be false.