Sam Bankman-Fried: Allegations of fraud spoil the entire crypto sector

Collection of capital is the biggest challenge for most start-up hedge funds. Sam Bankman-Fried had an answer to this problem, according to civil lawsuits published on Tuesday by US regulators. They claim that he knowingly tapped up to $ 8 billion in account holder for his crypto trading company Alameda Research. Parallel criminal complaints from the U.S. Ministry of Justice contain conspiracy for wire fraud.

Since the collapse of his crypto platform FTX, Bankman-Fried claimed in a number of interviews that he had only made it guilty of sloppy records. He added that he exercised little management control via Alameda.

The complaint of the US stock exchange supervisory authority Securities and Exchange Commission draws a different picture: not by a crazy scientist, but by a calculating fraud.

The SEC plants assume that "SBF", as it is generally called, fell victim to around 90 major investors. This included Sequoia, Blackrock and Thoma Bravo. They supported FTX with almost $ 2 billion in cash.

The fees should donate this blue chip fund a little comfort. But the area of ​​tension between trusted obligations towards limited partners and the fear of missing something will stop for capital allocators.

According to the Sec, Bankman-Fried was not the only failure to transfer customers to his trading company improperly. Rules for collateral and additional claims were not applied to FTX customer accounts. At the same time, the entrepreneur used customer funds effectively for his own purposes, including real estate purchases and political donations.

Bankman-Fried will have the opportunity to comment on the allegations of the Sec and the Doj.

The authorities claim that Bankman-Fried had traded west with his reputation as one straight shooter in the crypto-wild vests. That doesn't make the rest of the line -up look good. Binance, which once flirted with the rescue of FTX, temporarily exposes the withdrawal of the StableCoin USDC. The crypto-miner Argo Blockchain is the youngest player in the industry, which is approaching an application for bankruptcy.

Studies have shown that venture capital companies are more than ready to tolerate a high volume of failed deals in the early phase, simply because the asymmetrical returns of a return of, for example, the losses of 10 times a winner. However, wipeouts usually occur with little publicity and are not the result of an alleged fraud.

ftx is different because it devalued an entire speculative sector. If the profits of an outstanding crypto start-ups predominate the losses of investors in the flops, the founders behave quieter than SBF ever did.