Sam Bankman-Fried, the disgraced founder of collapsed crypto exchange FTX, was arrested in the Bahamas on Monday after US prosecutors filed criminal charges.
“SBF was arrested after receiving official notification from the United States that it had filed a criminal complaint against SBF and is likely to request his extradition,” the Bahamas government said in a statement.
The arrest is the startling latest development in one of the most significant setbacks in recent company history. Mr Bankman-Fried was scheduled to testify before Congress on Tuesday about the collapse of FTXwhich was one of the most powerful companies in the emerging crypto industry until it nearly collapsed overnight last month after deposit exhaustion exposed $8 billion in losses in the past month. its account.
Prosecutors for the Southern District of New York confirmed that Mr. Bankman-Fried had been charged and said the indictment would be sealed on Tuesday. Separately, the Securities and Exchange Commission said in a statement that it had jurisdiction “in connection with Mr. Bankman-Fried’s violation of our securities laws.”
A person with knowledge of the matter said criminal charges against Mr Bankman-Fried include wire fraud, wire fraud conspiracy, securities fraud, conspiracy to commit fraud. securities fraud and money laundering.
Bankman-Fried, the only person charged in the indictment, has been detained by Bahamian authorities, the person said. He was arrested shortly after 6 p.m. at his apartment complex in the Bahamas resort of Albany, according to a statement from Bahamian police. When Mr. Bankman-Fried may be transferred to the United States is unclear. Although the Bahamas has an extradition treaty with the United States, the process can take weeks and sometimes longer if criminal defendants object.
According to a person familiar with the matter, Mr Bankman-Fried cooperated during the arrest and will be held overnight in a cell at the police station. He is scheduled to appear on Tuesday at Magistrates Court in Nassau, the capital of the Bahamas.
A spokesman for Mr Bankman-Fried declined to comment. Nicholas Biase, a spokesman for the US attorney’s office, also declined to comment.
Consequences of the collapse of FTX
The sudden collapse of the crypto exchange has taken the industry by surprise.
“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the United States government, based on a sealed indictment,” said Damian Williams, US attorney for the Southern District of New York, said in a statement. “We are expected to proceed with the unsealing of the indictment in the morning and will have much to say by that time.”
Once the golden boy of the crypto industry and a major donor to the Democratic Party, Mr. Bankman-Fried watched his vast business and political empire collapse at an astonishing rate. His exchange filed for bankruptcy last month and his personal assets are virtually empty. While he was once hailed as the modern-day John Pierpont Morgan, he is now often compared to Bernie Madoff, the man who orchestrated the biggest Ponzi scheme in history.
Lawyers involved in the case expressed surprise at the suddenness of the arrest. Many believe Mr Bankman-Fried will face a criminal indictment. But complex white-collar fraud cases can take months to build. Until his arrest, Mr Bankman-Fried is expected to testify remotely about the collapse of FTX during a hearing before the House Financial Services Committee on Tuesday. The hearing is still going on, just without the testimony of Mr. Bankman-Fried.
“The American public deserves to hear directly from Mr. Bankman-Fried about actions that have harmed more than a million people,” Representative Maxine Waters, the committee chair, said in a statement. “The public has eagerly awaited these answers under oath before Congress, and the timing of this arrest has denied the public this opportunity.”
Several people familiar with the investigation said the speed with which authorities moved in bringing criminal and civil charges was an indication that prosecutors and regulators had received information from cooperating witnesses.
Mr. Bankman-Fried has faced scrutiny from dozens of regulatory agencies worldwide, including the Department of Justice, the SEC, and the Commodity Futures Trading Commission. Manhattan prosecutors examined whether FTX broke the law by transferring billions of dollars in client funds to Alameda Research, a crypto hedge fund that Bankman-Fried also founded and owns.
They also focused on whether Mr Bankman-Fried and his hedge fund were engaged in market manipulation, which may have contributed to the failure of two prominent cryptocurrencies last spring. .
Since the collapse of FTX, the SEC and federal prosecutors have been quick to process document requests from various parties, including several major financial firms that have invested up to $2 billion in the exchange. crypto exchanges early last year, two people who were briefed on the matter said.
It is unclear whether federal authorities are considering charging anyone else in connection with the FTX collapse. It is not uncommon for an SEC civil complaint to reveal more information about the events leading up to the filing of a charge than an indictment.
FTX’s downfall began early last month, when deposit withdrawals revealed an $8 billion loss in the company’s finances. Mr. Bankman-Fried sought a bailout from a rival company, major crypto exchange Binance, but the deal fell through after Binance inspected FTX’s books.
Mr. Bankman-Fried quickly became a villain in the crypto industry. Hundreds of thousands of customers are stuck with money on FTX, with little prospect of getting their money back anytime soon.
Surprising for an executive facing criminal investigations, Mr. Bankman-Fried gave numerous media interviews following the collapse of FTX. At the recent DealBook Summit, a New York Times event, he blamed “major management failures” and sloppy accounting for his company’s collapse, while insisting that he “never attempted to commit fraud” or knowingly got his hands on FTX client funds to fund. other investments.
When FTX filed for bankruptcy, Mr. Bankman-Fried resigned as chief executive. He was replaced by John Ray, a seasoned corporate turnaround specialist who oversaw the dissolution of energy trading company Enron following an accounting scandal in 2001.
In his bankruptcy filing last month, Mr. Ray said FTX’s management reflected “a complete failure to control the company”.
Mr Ray is also expected to testify before the House of Commons on Tuesday. in one prepared statementhe said FTX has been a mess.
“The downfall stemmed from the utter concentration of control in the hands of a very small group of extremely inexperienced and unsophisticated individuals,” he wrote.
