New York
CNN
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Sam Bankman-Fried, the founder of FTX failed crypto exchangewas arrested in the Bahamas on Monday after US prosecutors filed criminal charges against him, according to a Bahamian government statement.
The Southern District of New York, which is investigating bankman-fried and the collapse of FTX and its sister trading company Alameda, confirmed his arrest on Twitter.
“Tonight, authorities in the Bahamas arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the SDNY,” US Attorney Damian Williams wrote. “We hope to move forward with unsealing the allegation 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 Monday in Nassau, and will appear in court Tuesday, the Royal Bahamas Police said in a statement.
A representative for 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 said he had authorized Separate charges related to Bankman-Fried’s “securities law violations,” which will be filed publicly Tuesday.
it is not clear what charges expect Bankman-Friedthe 30-year-old crypto celebrity who became an outcast overnight last month when his company suffered a liquidity crisis and declared bankruptleaving at least a million depositors unable to access 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 it allows US prosecutors to return defendants to US soil if the charges were found punishable by a prison term of at least one year in both jurisdictions.
In the four weeks since FTX filed for bankruptcy, Bankman-Fried has sought to present itself as a somewhat unfortunate CEO who came out on his skis, denying allegations that he defrauded FTX customers.
“I did not knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. He certainly wasn’t as competent as she thought he was.”
Bankman-Fried was scheduled for Tuesday appear virtually before the Committee on Financial Services of the US House of Representatives. demanding answers about how the company tanked, rebounding throughout the ecosystem of digital assets. Several crypto firms have halted operations, freezing customer accounts, and in some cases filing for bankruptcy due to their exposure to FTX.
After her arrest, Rep. Maxine Waters, chair of the committee, said Bankman-Fried would no longer testify as scheduled Tuesday. However, the hearing was scheduled to go ahead, beginning with testimony from FTX’s new CEO, John J. Ray III, who took over from Bankman-Fried on November 11 and is tasked with guiding him through the process of bankruptcy.
“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 sentence Monday night.
So far, Ray has painted a picture of a crypto empire with virtually no corporate controls and a startling lack of financial and other record-keeping.
“The scope of the ongoing investigation is enormous,” Ray said in prepared remarks posted Monday before his testimony.
While the investigation is not complete, Ray said, FTX’s collapse appears to stem from the concentration of power “in the hands of a very small group of extremely inexperienced and unsophisticated individuals” who implemented virtually no corporate controls.
Ray also states as a fact that “FTX.com’s client assets were commingled with Alameda’s trading platform assets.” That’s a key issue for investigators, as FTX and Alameda were, on paper, separate entities.
Bankman-Fried has knowingly denied the fund mix and sought to distance itself from Alameda’s day-to-day management, which engaged in a number of high-risk business strategies including arbitrage and “yield farming,” aka token investing. paying digital rewards similar to interest rates, according to information from The Wall Street Journal.
He has admitted to mismanaging FTX and not paying enough attention to risk.
“Look, I screwed up,” he said at 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 within the businesses it oversaw.
“There was no one person who was primarily in charge of clients’ positional risk at FTX,” Bankman-Fried told DealBook. “And that feels pretty embarrassing in hindsight.”
One of the key questions about the FTX crash stems from a Reuters report Last month, he says Bankman-Fried built a “back door” into FTX’s accounting system, allowing him to alter the company’s financial records without triggering accounting red flags. The report says that Bankman-Fried used this “back door” to transfer $10 billion in client funds from FTX to Alameda, the hedge fund, and is now at least $1 billion missing.
Bankman-Fried has denied any knowledge of any such back door. “I don’t even know how to code” he said Cryptocurrency vlogger Tiffany Fong in an interview last month.
