As of at least May 2019, FTX, based in the Bahamas, has raised more than $1.8 billion from equity investors, including about $1.1 billion from about 90 U.S.-based investors, according to the SEC’s complaint. In his statements to investors, Bankman-Fried promoted FTX as a safe, responsible trading platform for crypto assets, specifically touting FTX’s advanced, automated risk controls to protect client assets.
The complaint alleges that Bankman-Fried actually orchestrated years of fraud to conceal from FTX’s investors (1) the secret diversion of FTX clients’ money into Alameda Research LLC, its private crypto hedge fund; (2) the undisclosed special treatment accorded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit” funded by the platform’s clients and exempting Alameda from certain key FTX mitigation measures ; and (3) undisclosed risk arising from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens.
The complaint further alleges that Bankman-Fried used the commingled funds of FTX clients at Alameda to make undisclosed risk investments, lavish real estate purchases and large political donations.
