Everything to Know About FTX Founder Sam Bankman-Fried's Legal Controversies (Including the Celebs Involved)

Introducing the man who went from billionaire to behind bars in a matter of days.

Sam Bankman-Fried, the founder of failed crypto exchange FTX, is facing investigations by state and federal authorities after the Bahamas-based company sought bankruptcy protection after amassing billions of dollars worth of losses.

US Attorney Damian Williams, who heads the federal prosecutors' office in Manhattan that charged Bankman-Fried, deemed the case "one of the biggest financial frauds in American history." The FTX founder was arrested on Dec. 12 in Nassau, Bahamas.

"From 2019 until earlier this year, Bankman-Fried and his co-conspirators stole billions of dollars from FTX customers," Williams told reporters on Tuesday. "He used that money for his personal benefit, including to make personal investments and to cover expenses and debts of his hedge fund, Alameda Research."

Forbes deemed Bankman-Fried "one of the richest people in crypto" before his FTX exchange and Alameda Research trading firms came crashing down. Additionally, he was formerly compared to finance figures J.P. Morgan and Warren Buffett.

While legal action has been taken against Bankman-Fried, others are also being investigated for potential involvement, including his ex-girlfriend Caroline Ellison. Furthermore, a number of celebrities are have been named as defendants in a class-action lawsuit against FTX.

Here's everything to know about the rise and fall of Bankman-Fried.

Who is Sam Bankman-Fried?

Sam Bankman-Fried is an entrepreneur, investor and former billionaire raised in California by two Stanford law professors, Joseph Bankman and Barbara Fried. Recognizable for his untamed hair and commonly referred to by his SBF initials, Bankman-Fried is a 2014 graduate from the Massachusetts Institute of Technology, where he earned a bachelor's degree in physics.

While a student at MIT, Bankman-Fried interned at proprietary trading firm Jane Street Capital and retuned full-time after graduation. He quit in 2017 and moved to Berkeley, Calif., where he worked as the director of development at the Centre for Effective Altruism before co-founding Alameda Research with former Altruism co-worker Tara Mac Aulay a few months later.

Bankman-Fried organized an arbitrage trade to take advantage of the the higher bitcoin price in Japan and moved as much as $25 million in bitcoin each day. Approximately 90% of the cryptocurrency trading firm was in the hands of Bankman-Fried by 2020.

The entrepreneur is notably regarded as the founder of cryptocurrency exchange FTX, which opened for business in May 2019. "Most of his wealth, which peaked at an estimated $26.5 billion, was tied up in ownership of about half of FTX and a share of its FTT tokens," according to Forbes.

In early November, FTX came crashing down and Bankman-Fried went from a current cryptocurrency billionaire to a former one in less than a week. He also became the target of investigations by the Securities and Exchange Commission and the Justice Department.

Why did FTX collapse?

FTX Group entities (along with its 130 plus affiliates) filed for Chapter 11 bankruptcy on Nov. 11, 2022. Bankman-Fried tweeted the news, in addition to his decision to step down as CEO of the cryptocurrency exchange company.

The firm was forced to file for bankruptcy "after a run on deposits left FTX with an $8 billion shortfall" reports the New York Times. "The damage has rippled across the industry, destabilizing other crypto companies and sowing widespread distrust of the technology."

Alameda was intertwined, having accumulated a large "margin position" on FTX — or simply, it had borrowed funds from the exchange. "The liquidity crunch at FTX came after Bankman-Fried secretly moved $10 billion of FTX customer funds to Alameda Research," experts told Reuters.

During an Oct. 1 interview with ABC News' George Stephanopoulos, Bankman-Fried said that he was "vaguely aware" that FTX deposits were being funneled to Alameda. "I should have been on top of this and I feel really, really regretful that I wasn't. A lot of people got hurt and that's on me."

Why was Sam Bankman-Fried arrested?

Bankman-Fried was arrested in the Bahamas (the country where FTX is based) on Dec. 12 after U.S. prosecutors filed criminal charges against him. The Southern District of New York, which is investigating the failed billionaire and his collapsed companies, confirmed the arrest on Twitter.

Prior to his arrest, Bankman-Fried was planned to testify virtually before the House Financial Services Committee on Dec. 13. He has been remanded in Bahamian custody until February after a Bahamas judge denied him bail.

Federal prosecutors charged Bankman-Fried with eight counts of fraud, money laundering and along with other financial crimes, per an unsealed indictment.

"U.S. prosecutors said Bankman-Fried had engaged in a scheme to defraud FTX's customers by misappropriating their deposits to pay for Alameda's expenses and debts and to make investments," reports Reuters.

Furthermore, "he defrauded lenders to Alameda by providing them with false and misleading information about the hedge fund's condition, and sought to disguise the money he had earned from committing wire fraud," prosecutors said.

From these charges, Bankman-Fried is looking at a potential prison sentence of 115 years.

On Monday, Dec. 19, a lawyer for Bankman-Fried said that he agreed to drop his extradition fight, and was expected to return to the United States quickly for an arraignment and bail hearing.

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Who is Sam Bankman-Fried's ex-girlfriend?

Bankman-Fried was in a relationship with Caroline Ellison, named co-CEO of Alameda in 2021 after joining as a trader in 2018. While Bankman-Fried owned 90% of the firm at the time, it was Ellison who helmed Alameda at the time both companies collapsed.

Daughter of esteemed economists Glenn Ellison (head of economics at MIT) and Sara Fischer Ellison (economics department lecturer at MIT), Ellison is a numbers wiz herself. In addition to her love of Harry Potter (she read the second book independently at the age of 5), Ellison has an affinity for effective altruism, like Bankman-Fried.

"Being comfortable with risk is very important," Ellison — who also previously worked at Jane Street, where she met Bankman-Fried — said on a podcast in May. "There are a lot of people who are very smart, but aren't good, necessarily, at the messy world of trading—especially crypto."

With all the legal action surrounding Bankman-Fried, people are now wondering where Ellison falls in the matter (no mention of Ellison was made in the criminal indictment or the SEC's civil complaint). A lawyer for Ellison did not immediately return a request for comment.

U.S. prosecutors and regulators have remained tight-lipped to date, but legal experts are continuing to look beyond Bankman-Fried as the only one involved.

Which celebrities are associated with FTX?

At the height of its success, FTX attracted several celebrities to promote the crypto giant's brand. It dominated the sports space, running star-studded commercials during the Super Bowl and purchasing naming rights to the Miami Heat's arena.

Now, famed faces like Tom Brady and ex-wife Gisele Bündchen are among a roster of celebrities who have been named as defendants in a class-action lawsuit against the bankrupt crypto-currency company FTX.

The lawsuit alleges that by endorsing the company, the former couple — along with Naomi Osaka, Steph Curry, Shaquille O'Neal, Larry David and others — brought credibility to the business, according to the Associated Press.

"Part of the scheme employed by the FTX Entities involved utilizing some of the biggest names in sports and entertainment — like these Defendants — to raise funds and drive American consumers to invest ... pouring billions of dollars into the deceptive FTX platform to keep the whole scheme afloat," the lawsuit stated.