- Four new charges against Sam Bankman-Fried were unsealed on Thursday.
- Prosecutors say FTX.US was denied opening a California bank account as it wasn't a licensed money services business.
When a California bank refused to give FTX an account in early 2020 because it wasn't registered as a money services business, prosecutors say that Sam Bankman-Fried started a new company to skirt that prohibition, and subsequently made false statements on a due dilligence questionnaire.
The allegations form part of new charges against Bankman-Fried unsealed this week for conspiracy to commit bank fraud, and conspiracy to operate an unlicensed money-transmitting business – two of four new counts that were made public Thursday. The bank's name was not revealed in the court filing.
The low-profile company, called North Dimension, was founded in August 2020 and was previously revealed in other complaints against Bankman-Fried. Last December, the Securities and Exchange Commission said that some FTX customers were told to make their deposits to North Dimension.
While the company didn't appear to have any links to FTX or its sister hedge fund, Alameda, the SEC said "Bankman-Fried had directed FTX to have customers send funds to North Dimension in an effort to hide the fact that the funds were being sent to an account controlled by Alameda."
Bankman-Fried previously told Bloomberg he "misaccounted" $8 billion after double-counting customer funds that were wired to Alameda.
FTX filed for bankruptcy in November following a run on the firm after CoinDesk reported that the crypto exchange's funds were conflated with Alameda's. FTX didn't have the money to cover all those withdrawals because executives had partly spent it on luxuries, with Alameda described as Bankman-Fried's "personal piggy bank" by the SEC.
NBC News previously reported that North Dimension was billed as an online electronics retailer, with a website full of misspelled words and nonsensical prices. Thursday's indictment says it also had no employees or business operations other than its bank account.
Now, prosecutors say this was an elaborate scheme to defraud a bank and operate an unlicensed money business. While FTX's American company was registered as a money services business in 2020, prosecutors say there was never an attempt to get a license for FTX.
So when the bank said they couldn't open an account for the crypto exchange, Bankman-Fried invented North Dimension and said it was for "trading" and "market making" even though it would actually take FTX deposits according to the indictment.
"Under Bankman Fried's supervision, employees of Alameda completed an account application that falsely stated that the purpose of the North Dimension bank account was for 'trading' and 'market making,'" the indictment unsealed on Thursday reads.
"Bank-I was also given a completed North Dimension due diligence questionnaire — which Bankman-Fried signed — that falsely stated that North Dimension 'trades on multiple cryptocurrency exchanges worldwide for its own account' and that North Dimension 'also participates in direct peer-to-peer, OTC purchases and sales with certain third parties for its own account.'"
In the 39-page document, signed by US Attorney Damian Williams, prosecutors wrote that the FTX cofounder told the bank "a false story" and made false claims on a due diligence questionnaire, because Bankman-Fried "knew that the account would be used to receive and transmit customer funds in the operation of a cryptocurrency exchange."
Prosecutors have also alleged that Bankman-Fried deleted a Slack message from FTX's top lawyer telling employees to preserve records, and that he made $100 million in political donations in other executives' names.
A spokesperson for Bankman-Fried declined to comment when contacted by Insider.