Prosecutors Charge that FTX Was Engaged in Fraud from the Beginning

The Commodity Futures Trading Commission also filed civil charges, claiming that Mr. Bankman-Fried, FTX and Alameda had defrauded customers and other cryptocurrency investors by manipulating the prices of certain digital assets, front-running other traders on the FTX platform, and lying about the location and use of customer funds.

The C.F.T.C. described a scheme to artificially boost the value of a digital token called FTT, which was created by FTX and issued to some investors while Alameda used it as collateral for loans from other cryptocurrency firms. According to the complaint, FTX used a third of its revenues to buy FTT and remove it from the marketplace, artificially inflating its value.

For weeks, Mr. Bankman-Fried claimed in numerous media interviews that he never intended to defraud anyone and that he had no idea what was going on at Alameda. But Rebecca Roiphe, a former prosecutor and a professor at New York Law School, said those arguments were unlikely to succeed in a courtroom.

“One of the classic defenses in a white collar case is to plead ignorance,” she said. “But it just doesn’t ring true when you head the company and have so much control over the organization.”

Before his arrest, Mr. Bankman-Fried was scheduled to testify at a hearing on Tuesday in front of the House Financial Services Committee, which is investigating the collapse of FTX. The hearing went ahead without him, featuring testimony from John Jay Ray III, a veteran of corporate restructuring who has taken over as chief executive of FTX.

In his opening statement, Mr. Ray blamed the collapse of FTX on the “absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals.”

In the early 2000s, Mr. Ray oversaw the unwinding of Enron, the energy trading firm that collapsed in an accounting scandal. At the hearing, he called the perpetrators of Enron’s crimes “highly sophisticated,” whereas FTX executives appeared to have engaged in “really just old-fashioned embezzlement,” he said.


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