Sam Bankman-Fried, who founded and ran FTX until a liquidity crisis forced the cryptocurrency exchange to go bankrupt last month, was arrested Monday in the Bahamas after facing criminal charges by US prosecutors.
It marks a stunning fall from grace for the 30-year-old entrepreneur who experienced a cryptocurrency boom to create one of the world’s largest cryptocurrency exchanges and a net worth that Forbes set at $26.5 billion a year ago.
Launched in 2019 and based in the Bahamas, the exchange filed for bankruptcy on Nov. 11 after struggling to raise funds to avoid collapse as traders scrambled to withdraw $6 billion from the platform in just 72 hours .
The Attorney General’s Office for the Bahamas said it was proceeding with the arrest after formal confirmation of charges against Bankman-Fried, adding that it expects he will be extradited to the United States.
A statement from the Bahamas Police said Bankman-Fried was arrested shortly after 6 p.m. Monday (11 p.m. GMT) at his apartment complex in Albany, Nassau, in the Bahamas.
“He was arrested in reference to various financial violations of the laws of the United States, which are also violations of the laws of the Commonwealth of the Bahamas,” the statement said. Tuesday.
A spokesman for the US law firm in Manhattan confirmed that Bankman-Fried had been arrested in the Bahamas, but declined to comment on the allegations.
“Earlier tonight, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the US Attorney’s Office for the Southern District of New York,” US Attorney Damian Williams said in a statement. . “We expect to take action tomorrow morning to unlock the charges and will have more to say by then.”
Mark Cohen, a Bankman-Fried lawyer, did not immediately respond to a request for comment.
Bankman-Fried’s indictment by US authorities comes as the Justice Department is considering charges against a much larger player in the crypto world, leading exchange Binance.
Reuters reported on Monday that some Justice Department prosecutors believe they have gathered enough evidence in their long-running investigation into Binance to charge the company and some top executives. A Binance spokesperson told Reuters regarding the story, “We have no insight into the inner workings of the US Department of Justice, nor would it be appropriate for us to comment on it.”
Binance is under investigation for possible money laundering and sanctions violations, Reuters reports. Others on the department have advocated taking the time to review more evidence, four people familiar with the case told Reuters.
The arrest also came a day before Bankman-Fried’s scheduled appearance before U.S. lawmakers on Tuesday, where he planned to testify via video link.
The US House Financial Services Committee was set to hear from Bankman-Fried and current FTX CEO John Ray in the first in a series of hearings to examine the collapse of FTX starting at 10am ET (1500 GMT).
FTX’s liquidity crisis came after Bankman-Fried secretly moved $10 billion in FTX client funds into its own trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter. At least $1 billion in customer funds had disappeared, the people said.
Bankman-Fried told Reuters that the company was not “secretly conveying” the “confusing internal labeling,” but rather misinterpreted it. When asked about the missing funds, he replied: “???”
In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged that risk management had failed, but tried to distance himself from allegations of fraud by saying he never knowingly mixed client money at FTX with money at Alameda.
“I’ve never tried to commit fraud,” Bankman-Fried said in a Nov. 30 interview at the New York Times Dealbook Summit, adding that he personally doesn’t think he’s criminally liable.
Bankman-Fried resigned as CEO of FTX on the same day as the bankruptcy filing.
The US Attorney’s Office in Manhattan, led by veteran prosecutor Williams, began investigating how FTX handled customer money in mid-November, a source with knowledge of the investigation told Reuters.
The Securities and Exchange Commission and Commodity Futures Trading Commission have also opened probes.
US crypto investors have also sued Bankman-Fried, alleging that he and a slew of celebrities who promoted FTX engaged in deceptive practices, resulting in the investors paying $11 billion in damages.
The demise of FTX marked the latest turmoil for the cryptocurrency industry this year. The overall crypto market has collapsed amid a series of meltdowns that have knocked out other major players, including Voyager Digital and Celsius Network.
(Except for the headline, this story has not been edited by NDTV staff and is being published from a syndicated feed.)
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