Topline
Collapsed crypto exchange FTX and its sister trading firm Alameda Research must pay $12.7 billion to resolve a suit from the Commodity Futures Trading Commission, according to a court order on Thursday, marking the latest financial blow for convicted head Sam Bankman-Fried’s once thriving crypto empire.
Collapsed crypto exchange FTX and its sister trading firm Alameda must pay $12.7 billion, a New York … [+]
Key Facts
A Manhattan-based federal District Court ruled FTX violated the federal Commodity Exchange Act and federal regulations under the trading commission, and that the companies “made material misrepresentations and omissions to customers.”
The order resolves a lawsuit filed by the commission in December 2022, and bans FTX and Alameda from trading digital assets, though it stops short of issuing civil penalties for FTX.
While FTX has been under fire over its fraud scheme since late 2021, the suit was filed over one year later, in December 2022, while the Securities and Exchange Commission filed a separate suit the same week.
The suit—which lists FTX, Alameda and Bankman-Fried as defendants—alleges the trio orchestrated a scheme that lost FTX customers over $8 billion by “routinely” accepting customer funds and holding them at Alameda, which “appropriated customer funds for their own operations and activities.”
Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you’ll always know the biggest stories shaping the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.
Key Background
Bankman-Fried founded Alameda as a crypto-heavy trading firm in 2017, and went on to create FTX as a crypto exchange, quickly giving the company a high-profile presence, earning the naming rights to the Miami Heat’s arena and landing endorsement deals with NFL star Tom Brady and actor Larry David. But after riding the wave of crypto enthusiasm during the first two years of the COVID-19 pandemic, FTX crumbled in November 2022, with a bombshell CoinDesk report showing financial irregularities in Alameda’s balance sheet— Forbes reported that month Alameda lost billions of dollars starting in 2021. In the months that followed, Bankman-Fried became the subject of heightened questions over a fraud scheme to divert FTX customer funds to Alameda to cover its losses. After a lengthy trial, Bankman-Fried was ultimately convicted in November 2023 on seven counts of conspiracy, money laundering, securities fraud and wire fraud. He was sentenced in March to 25 years in prison, and ordered to forfeit $11 billion, with a New York district court judge overseeing the case ruling FTX lost its customers $8 billion, plus another $1.7 billion from its investors and $1.3 billion from its lenders.
Further Reading
“>
