The Commodity Futures Trading Commission has formally filed fraud charges against disgraced FTX founder Sam Bankman-Fried.
The CFTC alleges that FTX customer deposits, which include fiat currency and digital assets, were appropriated by sister trading firm Alameda. The latter had "an essentially unlimited line of credit" on the exchange because of secret features in the underlying code that were created by FTX executives.
Bankman-Fried and other FTX executives also took questionable "loans" from Alameda that were used for purchasing real estate, property and so on.
At the direction of the former FTX CEO, Alameda started using more FTX customer funds when it faced a large number of loan recalls and was unable to service them. The defunct trading firm used customers' funds in order to facilitate these withdrawals.
The newly filed lawsuit also claims that Bankman-Fried actually intended to purchase BlockFi and Voyager in order to gain access to additional funds and fill the hole in the funds of the FTX customers.
Bankman-Fried was not concerned about the cover-up since he was certain that the liability of the sister trading firm was sufficiently collateralized by FTT, the native token of the exchange. At the same time, the market price of the exchange token was actively controlled by Alameda.
The defendants are likely to continue engaging in such acts and practices unless "restrained and enjoined by the court," the CFTC alleges.
"Charge SBF Day"
The lawsuit comes after the U.S. Securities and Exchange Commission also unveiled numerous charges against the cryptocurrency entrepreneur.
On Monday, Bankman-Fried was arrested in the Bahamas at the request of the U.S. government after federal prosecutors for the Southern District of New York filed fraud charges against the former FTX boss.
According to an indictment, which was unsealed earlier this Tuesday, Bankman-Fried misappropriated users' deposits.
The litany of charges leveled against him includes conspiracy to defraud the U.S., money laundering and securities fraud.
According to a statement issued by Bankman-Fried's legal counsel, the entrepreneur is currently reviewing the charges and considering "all of his legal options."