CFTC sues Sam Bankman-Fried

The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against FTX and Alameda Research founder Sam Bankman-Fried (SBF) for violations of the Commodity Exchange Act.

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Both entities are named as defendants in the filing.

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According to the CFTC, Bankman-Fried “owned, controlled and operated” the centralized FTX exchange and its affiliates, including Alameda.

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The regulator alleges that the defendants unlawfully used client funds for personal consumption and to extract value. SBF and FTX executives allegedly took hundreds of millions of dollars from Alameda in “undocumented loans” to purchase luxury real estate, political contributions and other non‑intended uses.

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“Under Bankman-Fried’s direction, FTX management created in the exchange’s core code features that effectively gave Alameda an unlimited line of credit on the platform,” the suit says.

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The CFTC noted that the affiliate was a leading market maker on the exchange. In the regulator’s view, FTX management created exceptions to trading rules that gave Alameda “unfair advantages” in executing trades.

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The commission seeks monetary penalties for the defendants, a ban on conducting business, and the reimbursement of legal costs and other expenses as the court deems appropriate.

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On November 11, FTX Group, which also includes Alameda, filed for bankruptcy. SBF stepped down as CEO.

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John Ray, who took over the role, accused the former exchange executives of concealing illicit operations with customer funds and of “secretly exempting Alameda from certain aspects of the platform’s auto-liquidation protocol.”

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On December 13, the U.S. Securities and Exchange Commission charged SBF with allegations of deceiving investors in FTX and misusing user funds on the trading platform.

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The Bahamian authorities arrested Bankman-Fried at the request of U.S. authorities.

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U.S. prosecutors charged SBF with eight criminal offenses, which, in total, could carry up to 115 years in prison.

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