CEO Sam Bankman-Fried
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FTX founder Sam Bankman-Fried was arrested by Bahamian authorities this evening after the US Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, setting the stage for the extradition and US trial of the once-at-heart cryptocurrency billionaire. . cryptocurrency exchange crash.
Damian Williams, U.S. Attorney for the Southern District of New York, He said on Twitter said he expects the federal government to move “to unseal the indictment in the morning.”
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Bahamas Attorney General Ryan Pinder said the United States has filed unspecified criminal charges against Bankman-Fried and “will likely seek his extradition.”
“The Bahamas and the United States have a shared interest in bringing to justice all individuals associated with the FTX who may have betrayed the public trust and violated the law,” Bahamas Prime Minister Philip Davis said in a statement.
“While the United States is pursuing individual criminal charges against SBF, The Bahamas will continue its own regulatory and criminal investigations into the collapse of the FTX with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere,” he said. statement.
Bahamian regulators and FTX’s attorneys fought a vicious battle in chambers and in the court of public opinion. On Monday morning, FTX attorneys once again accused the Bahamian government of working with Bankman-Fried to remove FTX assets from company control and transfer them to Bahamian crypto wallets. The arrest of Bankman-Fried by Bahamian law enforcement authorities, as well as the possibility of his extradition, indicate that close cooperation between the Bahamas and the United States will continue to develop throughout the bankruptcy process.
Bankman-Fried was expected to testify before the House Financial Services Committee tomorrow. His arrest is the first concrete step by regulators to hold individuals responsible for last month’s multibillion-dollar FTX explosion.
In November, FTX and its affiliates filed for bankruptcy, and Bankman-Fried resigned as CEO. A cryptocurrency trading firm imploded spectacularly after a run on assets similar to a bank run.
FTX’s collapse was accelerated when Bankman-Fried’s hedge fund Alameda Research discovered a highly concentrated position in FTT coins, which it used as collateral for billions in crypto loans, a report from CoinDesk revealed. Rival exchange Binance announced it would sell its stake in FTT, prompting a massive withdrawal of funds equivalent to bank turnover. The company froze its assets and declared bankruptcy days later. Reports later alleged that FTX had pooled client funds with Bankman-Fried’s crypto hedge fund Alameda Research, losing billions in client deposits along the way.
Bankman-Fried was replaced by John J. Ray III, who oversaw Enron’s bankruptcy. Ray is also scheduled to testify before Congress this week. In prepared remarks released Monday, Ray said FTX went on a “spending spree” from late 2021 to 2022, when “approximately $5 billion was spent on acquiring countless businesses and investments, many of which were only a fraction of what was paid for.” can” for them” and said the firm made more than $1 billion in “loans and other payments to insiders.”
Ray also confirmed media reports that FTX client funds were mingling with Alameda Research’s assets. Alameda used customer funds to make margin trades, which exposed them to large losses, Ray said.
If the federal government pursues wire or bank fraud charges, Bankman-Fried could face life in prison without the possibility of supervised release, legal experts told CNBC. Such a severe punishment would be unusual, but not unusual. Ponzi scheme creator Bernie Madoff was sentenced to 150 years in prison, an effective life sentence, for his massive ponzi scheme. The collapse of FTX has already led to the demise of BlockFi Lending and thrown the entire space into disarray.
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