FTX co-founder Sam Bankman-Fried has been indicted by federal prosecutors for allegedly paying tens of millions of dollars in bribes to at least one Chinese government official. The indictment, filed on Tuesday, accuses Bankman-Fried and others of transferring at least $40 million in cryptocurrency to influence and induce Chinese officials to unfreeze accounts belonging to his hedge fund, Alameda Research.
Frozen Accounts and Loss-Generating Trades
According to the indictment, accounts belonging to Bankman-Fried’s hedge fund were the target of a freezing order from Chinese police in November 2021. The accounts reportedly contained around $1 billion worth of cryptocurrency, and Bankman-Fried and his associates allegedly attempted “numerous methods” to unfreeze them. When these efforts failed, Bankman-Fried agreed to pay a multi-million dollar bribe to unlock the accounts.
Prosecutors claim that Bankman-Fried’s hedge fund then used the unfrozen assets to continue funding loss-generating trades, in what they allege was a fraud upon customers and investors for another year. FTX and Alameda Research imploded in November 2022 after concerns about their balance sheet led to a bank run.
Ongoing Scrutiny of the Crypto Industry
The charges against Bankman-Fried come amidst mounting scrutiny of the cryptocurrency industry. Just one day prior, U.S. regulators accused crypto exchange Binance of facilitating terrorist financing and violating derivatives law. Bankman-Fried also faces civil charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission.
