New York
CNN
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Sam Bankman-Fried, the founder of failed crypto exchange FTX, was arrested in the Bahamas on Monday after U.S. 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.
“Earlier tonight, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by SDNY,” wrote U.S. Attorney Damian Williams. “We expect to unseal the indictment in the morning and we will have more to say then.”
Bankman-Fried, was arrested without incident at his apartment complex shortly after 6 p.m. ET Monday in Nassau, and is due in court on Tuesday, the Royal Bahamas Police 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 said to have authorized separate charges relating to Bankman-Fried’s “violations of securities laws,” to be filed publicly on Tuesday.
It’s unclear what charges await Bankman-Fried, the 30-year-old crypto celeb who became an overnight pariah as his business suffered a liquidity crunch and filed for bankruptcy, leaving at least one 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 include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. ‘silver.
The US extradition treaty with the Bahamas allows US prosecutors to return defendants to US soil if the charges are deemed to carry 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 himself as a somewhat hapless chief executive who has struggled, denying accusations 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. I was certainly not as competent as I thought.
Bankman-Fried was scheduled to appear virtually on Tuesday before the U.S. House Financial Services Committee, which is demanding answers about how the company collapsed, ricocheting throughout the digital asset ecosystem. Several crypto companies have halted operations, freezing client accounts and in some cases declaring themselves bankrupt due to their exposure to FTX.
After his arrest, Rep. Maxine Waters, chair of the committee, said Bankman-Fried would no longer testify as scheduled on Tuesday. The hearing was set to continue, however, beginning with testimony from new FTX CEO John J. Ray III, who took over from Bankman-Fried on November 11 and is responsible for guiding him through the bankruptcy process. .
“While I am disappointed that we cannot hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement late Monday.
Ray has so far painted a picture of a crypto empire with virtually no corporate oversight and a shocking lack of financial and other record keeping.
“The scope of the ongoing investigation is enormous,” Ray said in prepared remarks released Monday ahead of his testimony.
Although the investigation is not complete, Ray said, the collapse of FTX appears to stem from the concentration of power “in the hands of a very small group of grossly inexperienced and unsophisticated individuals” who have virtually no implemented no corporate controls.
Ray also states that “FTX.com client assets were mixed with assets from the Alameda trading platform.” This is a key issue for investigators, as FTX and Alameda were, on paper, separate entities.
Bankman-Fried denied knowingly mixing funds and sought to distance himself from the day-to-day management of Alameda, which implemented a number of high-risk business strategies such as arbitrage and “yield farming.” that is, investing in digital tokens that pay interest-like rewards, according to reports from The Wall Street Journal.
He 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 companies he oversaw.
“There was no one who was primarily in charge of client position risk on FTX,” Bankman-Fried told DealBook. “And that seems quite embarrassing in retrospect.”
One of the main questions about FTX’s collapse stems from a Reuters report from last month that says Bankman-Fried built a “backdoor” into FTX’s accounting system, allowing it to alter the financial records of business without triggering accounting red flags. The report says that Bankman-Fried used this “backdoor” to transfer $10 billion in funds from FTX clients to Alameda, the hedge fund, and is now missing at least $1 billion.
Bankman-Fried denied knowledge of any such backdoor. “I don’t even know how to code,” he told cryptocurrency vlogger Tiffany Fong in an interview last month.
