Sam Bankman-Fried, who founded and ran FTX until a liquidity crisis forced the Bahamas-based cryptocurrency exchange to file for bankruptcy, was arrested Monday in the Bahamas after being criminally charged by US prosecutors.
It marks a stunning fall from grace for the 30-year-old entrepreneur who rode the cryptocurrency boom to create one of the world's largest cryptocurrency exchanges and a net worth that Forbes pegged a year ago at $26.5 billion.
The Bahamas-based exchange, launched in 2019, filed for bankruptcy on Nov. 11 after it struggled to raise money to stave off a crash as traders rushed to withdraw $6 billion from the platform in just 72 days. hours.
The Bahamas attorney general's office said it proceeded with the arrest after receiving formal confirmation of the charges against Bankman-Fried, adding that it expects him to be extradited to the United States.
Arrested without incident
A Bahamas police statement said Bankman-Fried had been arrested shortly after 6 pm ET Monday at his apartment complex, located in Albany, Nassau, in the Bahamas.
"He was arrested in reference to various financial offenses against the laws of the United States, which are also offenses against the laws of the Commonwealth of The Bahamas," the statement said, adding that he was taken into custody without incident and will appear in Magistrate Court. Nassau instance on Tuesday.
On December 12, 2022, the Bahamas Attorney General's Office announces the arrest by the Royal Bahamas Police of Sam Bankman-Fried ("SBF"), former CEO of FTX. pic.twitter.com/CRNeLPAbVp
A spokesman for the US attorney's office in Manhattan confirmed that Bankman-Fried had been arrested in the Bahamas, but declined to comment on the charges.
"Tonight, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the United States Attorney's Office for the Southern District of New York" US Attorney Damian Williams said in a statement. .
"We hope to move forward with unsealing the allegation in the morning and will have more to say at that time."
Mark Cohen, an attorney for Bankman-Fried, did not immediately respond to a request for comment.
Another crypto player under scrutiny
The Bankman-Fried indictment by US authorities comes as the Justice Department is considering charges against a much larger player in the world of cryptocurrency, Binance, the industry's leading exchange.
Reuters reported on Monday that some Justice Department prosecutors believe they have gathered enough evidence in their lengthy investigation of Binance to indict the company and some top executives. A Binance spokesperson told Reuters in connection with the story: โWe have no idea of โโthe inner workings of the US Department of Justice, nor would it be appropriate for us to comment if we did.โ
Binance is under investigation for possible sanctions violations and money laundering, Reuters reported. Others in the department have advocated taking the time to review more evidence, four people familiar with the matter told Reuters.
The arrest also came a day before Bankman-Fried was scheduled to appear before US lawmakers on Tuesday, where she planned to give testimony via video link.
The US House Committee on Financial Services was scheduled to hear from Bankman-Fried and current FTX CEO John Ray during the first of a series of hearings to examine the collapse of FTX starting in 10 a.m. Eastern time.
FTX's liquidity crisis came after Bankman-Fried secretly moved $10 billion of client funds from FTX to Alameda, Reuters reported, citing two people familiar with the matter. At least $1 billion in client funds had vanished, the people said.
'I never tried to commit fraud'
Bankman-Fried told Reuters the company did not "secretly transfer" but rather misread its "confusing internal labeling." When asked about the missing funds, he replied: "???"
In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged risk management failures but tried to distance himself from the fraud allegations, saying he never knowingly commingled client funds on FTX. with funding from his proprietary business firm, Alameda Research. .
"I never tried to commit fraud," Bankman-Fried said in an interview Nov. 30 at the New York Times Dealbook Summit, adding that he personally doesn't believe he bears any criminal liability.
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Bankman-Fried resigned as CEO of FTX the same day as the bankruptcy filing.
The US Attorney's Office in Manhattan, led by veteran securities fraud prosecutor Williams, began investigating in mid-November how FTX handled client funds, a source with knowledge of the investigation told Reuters.
The Securities and Exchange Commission and the Commodity Futures Trading Commission also opened investigations.
US crypto investors have also sued Bankman-Fried, alleging that he and a host of celebrities who promoted FTX engaged in deceptive practices, leaving investors with $11 billion in damages.
FTX's demise marked the latest upheaval for the cryptocurrency industry this year. The broader crypto market has plunged amid a series of crashes that have brought down other key players, including Voyager Digital and the Celsius Network.
