FTX founder and crypto billionaire Sam Bankman-Fried arrested in Bahamas
Crypto billionaire Sam Bankman-Fried is in custody after US authorities laid criminal charges.
FTX founder Sam Bankman-Fried was arrested on charges of wire fraud, securities fraud and money laundering on Tuesday and is being held in custody in the Bahamas, following criminal charges laid by US authorities.
The US is “likely to request his extradition” following the charges, according to a statement issued by Bahamian Attorney-General Ryan Pinder, in the latest twist to what’s been one of the swiftest and most significant downfalls in corporate history.
“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,” Bahamian prime minister Philip Davis said in a statement on Tuesday “While the US 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 co-operation of its law enforcement and regulatory partners in the US and elsewhere.”
Damian Williams, the US Attorney for the Southern District of New York, confirmed the arrest in a statement, and said that it was made “at the request of the US government, based on a sealed indictment filed by the SDNY”.
The charges, sources said, include wire fraud, securities fraud, securities fraud conspiracy and money laundering.
Mr Bankman-Fried was due to testify before the House Financial Services Committee on Wednesday, Australian time, amid claims federal prosecutors are building a fraud case against the former CEO. The committee is investigating the events that led to FTX’s implosion, after it filed for bankruptcy last month.
FTX was one of the world’s largest crypto exchanges, offering a platform for its customers to buy and sell digital currencies like bitcoin. An estimated 30,000 Australian customers and creditors are owed money after FTX’s spectacular collapse. The company employed five people in Australia and had a board of three including Mr Bankman-Fried.
At least $US1bn ($1.5bn) in customer funds are thought to have vanished from the FTX platform, and Mr Bankman-Fried allegedly transferred $US10bn of customer funds to his trading company Alameda Research, while creditors in Australia and globally have been left in limbo. It’s estimated more than a million FTX users remain locked out of their accounts and unable to access funds.
FTX faced an initial liquidity crisis in November when customers demanded withdrawals worth $US6bn – in the digital equivalent of a bank run – amid concerns over its ongoing viability.
Rival exchange Binance considered buying potions of FTX before quickly backing out, and Mr Bankman-Fried resigned on November 11 and his company filed for bankruptcy that same day.
At its peak, the exchange was valued at $US32bn, and attracted backing from venture capital group Sequoia Capital, the Ontario Teachers’ Pension Plan, SoftBank and several other major investors.
Mr Bankman-Fried was replaced as FTX CEO by John J Ray III, a restructuring expert who had also overseen Enron’s bankruptcy. Mr Ray released prepared remarks on Tuesday that FTX had embarked on a “spending binge” through 2021 and 2022 and that the company made more than $US1bn in “loans and other payments … to insiders”.
— db (@tier10k) December 12, 2022
USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.
— US Attorney SDNY (@SDNYnews) December 12, 2022
“Although our investigation is ongoing and detailed findings will have to await its conclusion, the FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” Mr Ray said.
“Customer assets from FTX.com were commingled with the assets from the Alameda trading platform (and) Alameda used client funds to engage in margin trading which exposed customer funds to massive losses.”
Before his arrest, Mr Bankman-Fried gave a number of interviews from his luxury complex in the Bahamas, denying claims of fraud but admitting he was “not nearly as competent as I thought I was.” “Clearly, I made a lot of mistakes or things I would give anything to be able to do over again,” the 30-year-old told the DealBook conference.
“I didn’t ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I saw it as a thriving, growing business. I was shocked by what happened this month.
“And, you know, reconstructing it, were there things I wish I had done differently.”
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