FirstFT: SBF engineered one of the ‘biggest financial frauds’ in US history

Sam Bankman-Fried has been accused of engineering “one of the biggest financial frauds in American history” as US prosecutors filed criminal charges against the founder of failed cryptocurrency exchange FTX.

In its indictment (read it in full here), the US Department of Justice charged Bankman-Fried with eight counts including conspiracy to commit wire fraud on customers and lenders, money laundering and violations of campaign finance laws.

Bankman-Fried, who was arrested in the Bahamas on Monday night local time, faces years in prison if convicted. Bahamian attorney-general Ryan Pinder said the country’s police force had taken Bankman-Fried into custody after receiving “formal notification” from the US government that it had filed criminal charges and was “likely to request his extradition”.

The charges pointed to a long-running scheme to misappropriate the deposits of exchange customers to pay debts and expenses of Bankman-Fried’s private trading firm Alameda Research and to make investments.

The conspiracy ran from 2019 — the year he founded FTX — until its collapse last month, according to the indictment. The failure of Bahamas-based FTX, once valued at $32bn, has resulted in billions of dollars of potential losses for millions of creditors, including retail investors, and sent shockwaves through the crypto industry.

• Global crypto standards: Financial watchdogs will lay out firm steps to regulate the cryptocurrency industry in early 2023, the outgoing secretary-general of the Financial Stability Board told the Financial Times.

• Crypto market: Investors have pulled more than $1bn from Binance as the world’s largest cryptocurrency exchange fights against a crisis of confidence in digital tokens and fears it will also be drawn into US investigations.

Five more stories in the news

1. China hits back on chips Beijing retaliated against sweeping US export controls on chips, filing a dispute with the World Trade Organization and escalating the tech war between the two countries. China’s commerce ministry said its WTO complaint was a legal and necessary measure to defend its “legitimate rights and interests”.

2. Paytm launches $103mn share buyback plan The SoftBank-backed, lossmaking Indian payments company has voted to buy back up to Rs8.5bn worth of shares, after the group’s stock price plummeted two-thirds since its initial public offering 13 months ago. It will repurchase up to 10.5mn shares at Rs810 ($9.81) rupees per share — 50 per cent more than Tuesday’s closing price.

3. Hong Kong ditches restrictive Covid policies Hong Kong will scrap some of its last Covid-19 restrictions that have crushed the city’s economy. From today, travellers to Hong Kong will be allowed to visit restaurants and bars within their first three days of arrival, while residents will no longer have to scan a contact tracing app to enter public venues.

4. US stock trading shake-up Banks, trading firms and brokers are bracing themselves for the biggest overhaul of US stock trading in almost two decades with the release of plans designed to lower costs for small investors.

5. Moderna’s mRNA cancer vaccine shows promise in early trial Moderna and Merck are preparing to launch the first phase 3 trial of a messenger RNA cancer vaccine after a study suggested it could be used to treat an aggressive type of skin cancer.

The day ahead

Japan industrial production figures Revised industrial production figures for October will be released this morning.

Fiji general election When Fiji goes to the polls for a national election today, prime minister Frank Bainimarama’s biggest challenge is expected to come from former prime minister Sitiveni Rabuka.

World Cup semi-final Morocco kicks off against France in today’s World Cup semi-final. The winner will face Argentina in the final on Sunday. Today’s match, however, casts a spotlight on a very particular historical relationship between the two nations.

US central bank meeting Policymakers are set to raise benchmark policy rates by half a percentage point, breaking successive 0.75 point interest rate increases.

What else we’re reading

Europe’s bid to catch up in the global chip race Taiwan is the global centre for the most advanced chipmaking. But growing fears of Chinese military intervention in Taiwan has prompted the US, Japan and many European nations to rush to incentivise expansion of chip production in their countries — which could come with its own set of problems.

Fusion power, explained US scientists have achieved energy gain in a fusion reaction for the first time, the country’s energy secretary Jennifer Granholm has confirmed. But how much closer does this breakthrough take the energy sector to the dream of fusion power? Energy correspondent Tom Wilson breaks it down.

Military briefing: escalating air war depletes Ukraine’s stockpile Kyiv is burning through its ammunition at an alarming rate as it faces down Moscow in a battle of dwindling stockpiles. Ukraine is urging western backers to provide more modern Nato standard surface-to-air systems.

‘Just another cheque’ As recessions deepen in the west, some are looking at the investment by the Saudi National Bank as a harbinger of more outlays to come, as oil-rich states echo bailouts during the financial crisis more than 10 years ago. But a month after the deal with Credit Suisse was announced, the chair of the SNB remains nonplussed by the attention.

The crypto winter: will my investments ever recover? More than a million crypto investors around the world stand to be wiped out by the collapse of crypto exchange FTX. On this episode of the Money Clinic podcast, Claer Barrett is joined by the FT’s digital assets correspondent and US financial commentator to discuss what the collapse means for the future of crypto.

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