The game is up for Sam Bankman-Fried

Only a month has elapsed since Sam Bankman-Fried, the founder of ftx, a crypto exchange, placed the firm, along with Alameda Research, its sister hedge fund, into bankruptcy proceedings. The exchange was unable to meet customers’ withdrawal requests; the problem, it became clear, was that some $8bn of customer assets had ended up in the custody of Alameda, and were missing. In the intervening days Mr Bankman-Fried has given countless interviews in which he has apologised, appeared confused by the unravelling of his empire, pleaded ignorance and generally tried to shift the blame.

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He told “Good Morning America” that he “failed to have proper oversight”. In an interview with New York magazine he said: “I fucked up. I did. In multiple ways, frankly.” He explained to the New York Times that there were mysterious discrepancies between what “the audited financials were, the true financials, what the exchange understood…”, and said to the Wall Street Journal that he could not account for the missing money: “I wasn’t running Alameda.”

Mr Bankman-Fried was arrested in the Bahamas on December 12th at the request of the American government. The next day he was denied bail; he is expected to be extradited shortly. The indictment charges Mr Bankman-Fried with eight criminal counts, including wire fraud against customers, lenders and investors, as well as conspiracies to commit money-laundering and commodities and securities fraud. For good measure, he is accused of defrauding the United States by violating campaign-finance laws. The Securities and Exchange Commission and the Commodities and Futures Trading Commission, two regulators, have also filed complaints.

Some of the facts in the filings are familiar to those who have been listening to Mr Bankman-Fried’s missives. He has admitted he told customers to route their funds to Alameda’s bank account—he suggested this was because ftx had not set up accounts, and that the funds were lost because of sloppy accounting. The sec complaint argues Alameda used the funds to make investments, buy lavish properties and offer political donations, and that this use of them means Mr Bankman-Fried was “orchestrating a massive years-long fraud”.

Mr Bankman-Fried has said he was unaware of what the hedge fund did with the cash. The complaint alleges he was in fact well aware, and that he set up ways for Alameda to borrow customers’ funds. On multiple occasions, the sec writes, he “directed ftx to increase the amount by which Alameda could maintain a negative balance”, giving it an unofficial credit line to take customer funds. The sec complaint also alleges that Mr Bankman-Fried made Alameda exempt from the processes by which customers’ trading positions were liquidated when markets moved against them.

In May, as crypto markets crashed, despite having “already taken billions of dollars of ftx customer assets” when Alameda could not meet loan obligations, the sec alleges that Mr Bankman-Fried “directed ftx to divert billions more in customer assets to Alameda”. Most galling, perhaps, is the allegation that “even as it was increasingly clear that Alameda and ftx could not make customers whole”, Mr Bankman-Fried continued to make venture investments and took out personal “loans” from Alameda for himself and other ftx higher-ups.

The sum of these actions, the sec argues, is that there was no real distinction between Alameda and ftx, and that Mr Bankman-Fried used the hedge fund as his “personal piggy bank” without disclosing this to investors or customers. In a congressional hearing on December 13th John Ray III, appointed boss of ftx by Mr Bankman-Fried before the firm filed for bankruptcy, summarised it in a similar manner: “This is really old-fashioned embezzlement. This is just taking money from customers and using it for your own purpose.”

Mr Bankman-Fried denies any illegal activity and has sought in interviews to distance himself from criminal wrongdoing. If he were successfully convicted, the former ftx boss might spend the rest of his life behind bars. When Bernard Madoff, a notorious financier who ran a Ponzi scheme, was sentenced in 2009 the judge noted that: “The fraud loss known to date, which is greater than $13bn, is more than 32 times the baseline level of loss that would carry a sentence of life under the us Sentencing Guidelines.” The judge recommended that Madoff should serve 150 years. The authorities put the cost of Mr Bankman-Fried’s alleged fraud at $8bn.

Mr Bankman-Fried seems in denial about the situation. He could not attend the congressional hearing, as he was in custody, but his intended testimony leaked. In it he claims he was manipulated into filing for bankruptcy by his general counsel, that the team in charge are mismanaging the process, and that Alameda and ftx’s troubles only really began when the boss of a rival exchange tweeted he would sell ftx tokens. Mr Bankman-Fried insists the firms could have raised capital and made customers whole. When he put this to Ryne Miller, his general counsel, Mr Miller replied with an answer clear, seemingly, to everyone but Mr Bankman-Fried. “There’s nothing to save, Sam.”

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