Ripple’s General Counsel Says SEC Is Focused on Recovering FTX Funds For Large Investors, Not “Consumers”

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Alderoty faults SEC’s recently-filed charges against SBF.

Ripple’s general counsel Stuart Alderoty has commented on the recent charges filed by the Securities and Exchange Commission (SEC) against FTX’s founder Sam Bankman-Fried (SBF), a day after his arrest.

SEC Officially Charges Bankman-Fried

Recall that the SEC officially filed charges against the former CEO of now-bankrupt cryptocurrency exchange FTX. The Securities and Exchange Commission charged SBF with violating the anti-fraud provisions of the Securities Act of 1933 and the 1934 Securities Exchange Act.

Furthermore, the SEC seeks an injunction against future securities law violations by Bankman-Fried, prohibiting him from participating in the sale, purchase, offer, or issuance of securities to the public, except for his account.

The SEC alleged that SBF orchestrated a scheme that defrauded equity investors in FTX. According to the SEC’s charges, Bankman-Fried hid his diversion of customers’ funds to his crypto trading company Alameda Research while raising over $1.8 billion from equity investors.

SEC chair Gary Gensler said in a statement: 

“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.” 

Ripple’s General Counsel Reacts

In a recent tweet, Ripple’s general counsel Stuart Alderoty shed more light on the charges filed by the SEC against the former CEO of the former second-largest cryptocurrency exchange by trading volume.

Alderoty said the SEC’s complaint against Bankman-Fried is a plot by the agency to recover funds for “FTX’s sophisticated equity investors.” He noted that the regulatory body does not care about retail investors “who have been left holding the bag in bankruptcy court.”

“To be clear: The SEC’s tag-along complaint against SBF seeks to recover funds for FTX’s sophisticated equity investors, not the consumers,” Alderoty said.

Arturo Portilla, replying to Alderoty said: “In other words, the SEC is only seeking to recover the funds of those “sophisticated” investors who not only couldn’t bother to conduct serious due diligence on FTX but also helped SBF create the perception amongst retail users that FTX was a solid/legitimate enterprise.”

Alderoty Criticizes SEC’s Regulatory Approach

It bears mentioning that Ripple’s general counsel has been outspoken against the SEC’s regulatory approach in the crypto industry. Alderoty has previously accused the SEC of prioritizing protecting its turf at the expense of U.S. investors. For Alderoty, the SEC’s primary concern is becoming the cop on the beat for crypto, and the agency cares less about who gets hurt in the process.

Recall that month after the SEC charged Ripple for allegedly offering unregistered security offering, Alderoty described the lawsuit as a rug pull against investors, who recorded huge losses as a result of the lawsuit.

Meanwhile, TheCryptoBasic reported that U.S. authorities arrested SBF in the Bahamas at the request of the U.S. Department of Justice. The former CEO of FTX was charged with wire fraud, securities fraud conspiracy, and money laundering. Hours after his arrest, the SEC announced that it was preparing charges against Bankman-Fried separate from the ones leading to his arrest.

SBF’s Legal Woes Heighten

SBF’s legal troubles heightened yesterday after the Commodity Futures Trading Commission (CFTC) filed charges against the founder of FTX. The CFTC alleged that Bankman-Fried violated the Commodity Exchange Act while accusing him of using customers’ funds for his expenditures.

“Contrary to [SBF’s] representations and without disclosure to FTX customers, Alameda and FTX commingled funds and freely used FTX customer funds as if they were their own, including as capital to deploy in their own trading and investment activities,” CFTC said in court records filed on December 13 in the Southern District of New York. 

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