Sam Bankman-Fried, founder of FTX, is arrested in the Bahamas

new York

Sam Bankman-Fried, the founder of failed crypto exchange FTX, was arrested Monday in the Bahamas after US prosecutors filed criminal charges against him, according to a statement by the Bahamas government.

The Southern District of New York, which is investigating Bankman-Fried and the collapse of FTX and its sister trading firm Alameda, confirmed his arrest on Twitter.

“Tonight, at the request of the US government, Bahamian authorities arrested Samuel Bankman-Fried based on a sealed SDNY indictment,” wrote US Attorney Damian Williams. “We expect to unseal the charges tomorrow morning and have more to say at that point.”

Bankman-Fried was arrested without incident at his apartment complex in Nassau on Monday just after 6 p.m. ET and is scheduled to appear in court on Tuesday, the Royal Bahamas Police Force said in a statement.

A representative from Bankman-Fried’s legal team did not immediately respond to CNN’s request for comment.

Shortly after the SDNY confirmed his arrest, the Securities and Exchange Commission came forward said it was authorized separate indictments related to Bankman-Fried’s “violations of securities laws” to be publicly filed Tuesday.

It’s unclear what charges await Bankman-Fried, the 30-year-old crypto celebrity who became an overnight pariah last month when his company suffered a liquidity crisis and filed for bankruptcy, leaving at least a million depositors without access to their funds .

The New York Times, citing a person familiar with the matter, reported that the charges against Bankman-Fried included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.

The United States’ extradition treaty with the Bahamas allows US prosecutors to return defendants to American soil if the charges would carry a minimum sentence of one year in both jurisdictions.

In the four weeks since FTX filed for bankruptcy, Bankman-Fried has attempted to portray himself as a somewhat unfortunate CEO who has gotten over his skis and denied allegations that he had defrauded FTX’s customers.

“I did not knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want something like that to happen. I certainly wasn’t nearly as competent as I thought it would be.”

Bankman-Fried was scheduled to appear virtually before the US House Financial Services Committee on Tuesday, which is demanding answers about how the company collapsed and bounced across the digital asset ecosystem. Several crypto companies have shut down operations, frozen customer accounts and, in some cases, filed for bankruptcy themselves as a result of exposure to FTX.

After his arrest, Rep. Maxine Waters, chair of the committee, said Bankman-Fried would not testify Tuesday as scheduled. However, the hearing should continue, beginning with testimony from FTX’s new CEO, John J. Ray III, who took over Bankman-Fried on November 11 and is tasked with guiding the company through the bankruptcy process.

“While I am disappointed we will not be hearing from Mr Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement Monday night.

Ray has so far painted a picture of a crypto empire with virtually no corporate controls and a shocking lack of financial and other records.

“The scope of the ongoing investigation is enormous,” Ray said in prepared remarks released Monday ahead of his testimony.

Although the investigation is ongoing, Ray says, FTX’s collapse appears to have resulted from the concentration of power “in the hands of a very small group of grossly inexperienced and undemanding individuals” who have failed to implement virtually any corporate controls.

Ray also notes that “ client assets have been commingled with Alameda trading platform assets.” This is a key issue for investigators since FTX and Alameda were separate entities on paper.

Bankman-Fried has denied knowingly mixing funds and has sought to distance himself from day-to-day management at Alameda, which has developed a number of high-risk trading strategies such as arbitrage and “yield farming,” aka investing in digital tokens that pay interest-like returns rewards, according to a Wall Street Journal report.

He has admitted mismanaging FTX and not paying enough attention to risk.

“Look, I screwed up,” he told the New York Times’ DealBook Summit late last month. “I was CEO of FTX … I had a responsibility.”

Bankman-Fried also acknowledged the lack of corporate controls and risk management at the companies he oversees.

“There was no one person primarily responsible for client position risk on FTX,” Bankman-Fried told DealBook. “And that feels pretty embarrassing in hindsight.”

One of the key questions surrounding FTX’s collapse stems from a Reuters report last month that said Bankman-Fried installed a “backdoor” in FTX’s accounting system, allowing it to alter the company’s financial records without the Raising red flags from accounting. According to the report, Bankman-Fried used this “backdoor” to transfer $10 billion in FTX client funds to Alameda, the hedge fund, and at least $1 billion is now missing.

Bankman-Fried has denied knowledge of any such backdoor. “I don’t even know how to code,” he said in an interview with cryptocurrency vlogger Tiffany Fong last month.

Leave a Reply

Your email address will not be published. Required fields are marked *