by
New York
Cnn
—
Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange FTX, was arrested in the Bahamas on Monday after US prosecutors filed criminal charges against him, according to a statement from the Bahamian 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, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the SDNY,” wrote US attorney Damian Williams. “We expect to move to open the indictment in the morning and will have more to say at that time.”
Bankman-Fried, was arrested without incident at his apartment complex shortly after 6 p.m. ET on Monday in Nassau, and is expected to appear in court on Tuesday, the Royal Bahamas Police Force said in a statement.
A representative of 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 he said he authorized Separate charges related to Bankman-Fried’s “violations of securities laws,” which will be filed publicly 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 cash crunch and filed for bankruptcy, leaving at least a million depositors in the inability to access your 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 US extradition treaty with the Bahamas allows US prosecutors to return defendants to US soil if the charges would be deemed punishable by at least one year’s imprisonment in either jurisdiction.
In the four weeks since FTX filed for bankruptcy, Bankman-Fried has tried to portray himself as a somewhat hapless CEO who went out on skis, denying allegations that he defrauded FTX’s clients.
“I have not knowingly committed fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I certainly wasn’t as competent as I thought I was.
Bankman-Fried was scheduled to appear virtually before the US House Financial Services Committee on Tuesday, which is asking for answers about how society collapsed, bouncing throughout the digital asset ecosystem. Several cryptocurrency firms have shut down operations, freezing customer accounts and in some cases filing for bankruptcy due to their exposure to FTX.
Following her arrest, Rep. Maxine Waters, chair of the committee, said Bankman-Fried would no longer testify as scheduled Tuesday. The hearing had to go ahead, however, starting with testimony from FTX’s new CEO, John J. Ray III, who took over from Bankman-Fried on Nov. 11 and is tasked with guiding him through the bankruptcy process.
“While I’m disappointed that we won’t be able to hear 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 thus 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 before his testimony.
While the investigation is not completed, Ray said, FTX’s collapse appears to stem from the concentration of power “in the hands of a very small group of grossly untrained and unsophisticated individuals” who have failed to implement virtually any corporate oversight.
Ray further states that “FTX.com’s client resources were mixed with the Alameda trading platform’s resources.” This is a key question for investigators, as FTX and Alameda were, on paper, separate entities.
Bankman-Fried denied the deliberate mingling of funds and sought to distance himself from the day-to-day management of Alameda, which engaged in a number of high-risk trading strategies such as arbitrage and “yield farming”. in digital tokens that pay rewards similar to interest rates, the Wall Street Journal reported.
He admitted that he mismanaged FTX and did not pay enough attention to the 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 business and risk management controls within the businesses he oversaw.
“There was no one person who was primarily responsible for clients’ position risk on FTX,” Bankman-Fried told DealBook. “And that looks pretty embarrassing in retrospect.”
One of the key questions about FTX’s collapse stems from a Reuters report last month that said Bankman-Fried built a “backdoor” into FTX’s accounting system, allowing it to tamper with the company’s financial records without setting off accounting red flags. . The report claims that Bankman-Fried used this “backdoor” to transfer $10 billion of FTX client funds to Alameda, the hedge fund, and is now missing at least $1 billion.
Bankman-Fried denied having knowledge of any such backdoors. “I don’t even know how to code,” she told cryptocurrency vlogger Tiffany Fong in an interview last month.
