Feds Reportedly Prep Potential Fraud Case Against FTX Founder

Prosecutors are examining how FTX transferred funds for a possible fraud case against its founder.

Federal prosecutors are examining how funds held by the cryptocurrency exchange moved outside the US as the company headed into bankruptcy, Bloomberg News reported Friday (Dec. 9), citing a source with knowledge of the matter.

The source said investigators are also probing whether hundreds of millions of dollars were improperly moved to the Bahamas — where FTX is based — at the time of the bankruptcy. The investigation is also looking into whether FTX broke the law when it transferred funds to sister company Alameda Research, which was started by FTX founder Sam Bankman-Fried.

PYMNTS has reached out to FTX and the U.S. Justice Department for comment.

Related: FTX Founder Will Testify Before Congress

While investigators and regulators around the world are looking into Bankman-Fried and the fall of his company, the former FTX CEO has yet to be charged with a crime.

He is due to testify this week before the House Financial Services Committee. On Twitter last week, Bankman-Fried wrote that his testimony will try to “shed what light I can” on his former company’s solvency, and “pathways that could return value to users internationally.”

He also plans to discuss what he thinks caused the crash and his “own failings.”

As PYMNTS wrote recently, the collapse of FTX has underlined “how much the crypto industry thrived between regulatory and jurisdictional gaps.”

It has also shown the dangers consumers face when the companies they’ve trusted with control of their assets collapse into these gaps.

What regulators in the US do to prevent this and protect US consumers who want to invest in crypto is an important question, especially as more than a million customers have likely lost everything they entrusted to FTX.

“The failed exchange’s downfall was not without collateral damage to the crypto industry either,” PYMNTS wrote. “FTX’s unexpected bankruptcy severely rattled investor confidence and sent deep tremors throughout the broader marketplace, simultaneously feeling several of FTX’s entangled peers.”