Sam Bankman-Fried, the founder of the defunct cryptocurrency exchange FTX, was detained there Monday after US authorities filed criminal charges against him, according to a statement released by the government of the Bahamas on Monday. Using Twitter, the Southern District of New York verified Bankman’s arrest of Fried’s as part of its investigation into the demise of FTX and its sister trading company Alameda.
Based on a classified indictment filed by the SDNY, Bahamian authorities detained Samuel Bankman-Fried earlier tonight at the request of the United States government, according to a letter from US attorney Damian Williams.“We expect to move tomorrow morning to unlock the indictment and will have more to say by then.” The Royal Bahamas Police Force said in a statement that Bankman-Fried was detained without incident at his apartment complex in Nassau around 6 p.m. ET Monday and was scheduled to appear in court on Tuesday.
CNN’s request for a response from Bankman-legal Fried’s team went unanswered for some time. Separate costs related to Bankman-“Fried’s violations of securities laws” were approved by the Securities and Exchange Commission and would be publicly filed Tuesday, the SEC said shortly after the SDNY confirmed its arrest.
Bankman-Fried, a 30-year-old crypto star who became an overnight pariah last month when his company had a liquidity problem and filed for bankruptcy, leaving at least a million depositors unable to access their accounts, could face a variety of allegations, the nature of which remains unknown. According to the New York Times, citing a source familiar with the case, allegations against Bankman-Fried include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.
The United States and the Bahamas have an extradition pact that allows U.S. prosecutors to extradite offenders to U.S. territory if the crimes carry a mandatory minimum sentence of one year in prison in either country. While disputing allegations of fraud against FTX’s clients, Bankman-Fried has spent the past four weeks trying to portray himself as a rather ignorant CEO who was on his skis.
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“I have not knowingly committed fraud”, he told the BBC during the weekend. “I didn’t want all of this to happen. I certainly wasn’t as capable as I thought I was.” On Tuesday, Bankman-Fried was set to appear virtually before the US House Financial Services Committee, which is seeking answers about how the company collapsed and reverberated in the digital asset market.
#SamBankman pic.twitter.com/hdfOR4dqe4
— Lane (@LaneNewsom) December 13, 2022
Due to their reliance on FTX, some cryptocurrency companies have ceased operations, blocked customer accounts and in some cases filed for bankruptcy. Rep. Maxine Waters, the chair of the committee, said after Fried Bankman’s arrest that he would not testify on Tuesday as scheduled. But the meeting would begin with evidence from FTX’s new CEO, John J. Ray III, who took over from Bankman-Fried on Nov. 11 and is responsible for guiding the company through bankruptcy.
“While I am disappointed that we will not be able to hear from Mr Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement Monday evening. So far, Ray has described a crypto company with shockingly little financial and other data. “The scope of the ongoing investigation is vast,” Ray said in prepared comments posted Monday ahead of his hearing.
While the investigation is ongoing, Ray has been speculating “a very small number of very incompetent and naive people” failing to take barely any organizational control were responsible for the demise of FTX. That “customer assets from FTX.com were mixed with assets from the Alameda trading platform,” as Ray puts it, is also a proven fact. Since FTX and Alameda legally existed separately, this is a crucial question for researchers.
SBF’s denials
The Wall Street Journal reports that Alameda engaged in risky trading strategies such as arbitrage and yield farming, i.e. the investment in digital tokens that pay interest-like rewards. Bankman-Fried has denied knowledge of any mismatching of funds and has attempted to distance himself from the day-to-day management of Alameda.
Admittedly, his management of FTX and lack of focus on risk were mistakes. At the end of last month he said: ‘Look, I screwed up’ New York TimesDealBook top. “I was CEO of FTX…I had a responsibility.” Bankman-Fried also admitted that the companies he audited lacked corporate governance and risk management.
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for FTX, “there was no one largely responsible for consumer risk positioning,” Bankman-Fried told DealBook. “In hindsight, it was kind of humiliating.” According to a Reuters article last month, Bankman-Fried built a “backdoor” into FTX’s accounting system that allowed him to change the company’s financial records without triggering accounting red lights, which is one of the most pressing concerns behind the demise of FTX evokes.
Ftx CEO was arrested #crypto#sambankman#ftx#DeWhiteLotus#BLACKPINK pic.twitter.com/647qGzBnNL
— Dig Down Crypto (@PastelWeasley) December 13, 2022
Bankman-Fried allegedly used this “back door” to move $10 billion in client money from FTX to Alameda, a hedge firm; of this amount, at least $1 billion has disappeared. Bankman-Fried has always denied knowledge of any such loophole. In an interview last month he said: “I don’t even know how to code,” when asked about his experience with cryptocurrencies by YouTuber Tiffany Fong.
Last lines
Sam Bankman-Fried, the man behind the now-defunct cryptocurrency exchange FTX, was arrested Monday in the Bahamas after US officials filed criminal charges against him, according to a statement from the country’s government. As part of its investigation into the fall of FTX and its sister trading operation, New York’s Southern District Alameda confirmed Bankman’s arrest via Twitter.
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