CEO Sam Bankman-Fried
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FTX founder Sam Bankman-Fried was arrested by Bahamian authorities Monday night after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian authorities, setting the stage for extradition and U.S. trial for the onetime crypto billionaire on the coronary heart of the crypto change’s collapse.
Before his arrest was introduced, Bankman-Fried had been anticipated to testify nearly earlier than the House Financial Services Committee on Tuesday. His arrest is the primary concrete transfer by regulators to carry people accountable for the multi-billion greenback implosion of FTX final month.
Damian Williams, the U.S. Attorney for the Southern District of New York, mentioned on Twitter that the federal authorities anticipated shifting to “unseal the indictment in the morning.”
Bahamas Attorney General Ryan Pinder mentioned that the United States was “likely to request his extradition.”
In an announcement, Bahamian Prime Minister Philip Davis mentioned, “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.”
“While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere,” continued the assertion.
Bahamian regulators and FTX’s attorneys had been engaged in a bruising battle in chambers and within the court docket of public opinion. Earlier Monday, FTX attorneys accused the Bahamian authorities of allegedly working with Bankman-Fried to spirit away FTX belongings from firm management and into into crypto wallets managed by Bahamian regulators.
Bankman-Fried’s arrest by Bahamas legislation enforcement, in addition to his anticipated extradition, recommend that shut cooperation between the Bahamas and the U.S. will proceed to evolve all through the chapter proceedings. The Bahamas and the United States have had an extradition treaty in place because the early twentieth century, when the Bahamas was nonetheless below British management. The present treaty was signed in 1990 and requires that the requesting celebration present an arrest warrant issued by a choose or “other competent authority.”
In November, FTX and its associates filed for chapter and Bankman-Fried stepped down from his position as CEO. The crypto buying and selling agency imploded in spectacular style following a run on belongings much like a financial institution run.
FTX’s collapse was precipitated when reporting from CoinDesk revealed a extremely concentrated place in self-issued FTT cash, which Bankman-Fried’s hedge fund Alameda Research used as collateral for billions in crypto loans. Binance, a rival change, introduced it might promote its stake in FTT, spurring a large withdrawal in funds. The firm froze belongings and declared chapter days later. Reports later claimed that FTX had commingled buyer funds with Bankman-Fried’s crypto hedge fund, Alameda Research, and that billions in buyer deposits had been misplaced alongside the best way.
Bankman-Fried was changed by John J. Ray III, who had overseen Enron’s chapter. Ray can be scheduled to testify earlier than Congress this week. In ready remarks launched Monday, Ray mentioned that FTX went on a “spending binge” from late 2021 via 2022, when roughly “$5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them,” and that the agency made greater than $1 billion in “loans and other payments…to insiders.”
Ray additionally confirmed media stories that FTX buyer funds have been commingled with belongings from Alameda Research. Alameda used consumer funds to do margin buying and selling, which uncovered them to large losses, Ray mentioned.
Legal specialists instructed CNBC that if the federal authorities pursues wire or financial institution fraud fees, Bankman-Fried may face life in jail with out the opportunity of supervised launch. Such a extreme punishment could be uncommon however not extraordinary. Ponzi scheme mastermind Bernie Madoff was sentenced to 150 years in jail, an efficient life sentence, for his large ponzi scheme. FTX’s collapse has already triggered the demise of BlockFi Lending, and has thrown all the area into disarray.