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Sam Bankman-Fried, FTX Founder, Arrested In The Bahamas After The US Filed Criminal Charges Against Him

Sam Bankman-Fried, FTX Founder, Arrested In The Bahamas After The US Filed Criminal Charges Against Him
Sam Bankman-Fried, the founder of FTX, was arrested by Bahamian authorities Monday evening after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, paving the way for extradition and a U.S. trial for the onetime crypto billionaire at the heart of the crypto exchange's collapse.
Bankman-Fried was scheduled to testify virtually before the House Financial Services Committee on Tuesday before his arrest was announced, but his attorneys told CNBC that he will not appear.
His arrest is the first concrete step taken by regulators to hold individuals accountable for FTX's multibillion-dollar collapse last month.
The U.S. Attorney for the Southern District of New York, Damian Williams, said on Twitter that the federal government planned to "unseal the indictment in the morning." According to a person familiar with the situation, the charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.
Meanwhile, the Securities and Exchange Commission has filed a separate set of charges against Bankman-Fried for "violations of our securities laws," which will be filed publicly tomorrow in the Southern District of New York, according to enforcement director Gurbir Grewal.
According to Bahamas Attorney General Ryan Pinder, the US is "likely to request his extradition." The Royal Bahamas Police Department confirmed his arrest and said he would appear in Nassau magistrate court on Tuesday.
"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," said Bahamian Prime Minister Philip Davis in a statement.
“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 statement.
Bahamian regulators and FTX's lawyers had fought a bloody battle in chambers and in the court of public opinion. Earlier Monday, FTX attorneys accused the Bahamian government of conspiring with Bankman-Fried to transfer FTX assets out of company control and into crypto wallets controlled by Bahamian regulators.
The arrest of Bankman-Fried by Bahamas law enforcement, as well as his expected extradition, indicate that close cooperation between the Bahamas and the United States will continue throughout the bankruptcy proceedings. Since the early twentieth century, when the Bahamas was still under British control, the Bahamas and the United States have had an extradition treaty in place.
The current treaty, which was signed in 1990, requires the requesting party to present an arrest warrant issued by a judge or "other competent authority."
In November, FTX and its affiliates declared bankruptcy, and Bankman-Fried resigned as CEO. The crypto trading firm imploded spectacularly after a run on assets akin to a bank run.
The collapse of FTX was precipitated by CoinDesk reporting on a highly concentrated position in self-issued FTT coins, which Bankman-hedge Fried's fund Alameda Research used as collateral for billions of dollars in crypto loans. Binance, a competitor exchange, announced it would sell its stake in FTT, causing a massive outflow of funds. After freezing assets, the company declared bankruptcy a few days later.
Later reports claimed that FTX had mixed customer funds with Bankman-crypto Fried's hedge fund, Alameda Research, and that billions of dollars in customer deposits had been lost in the process.
John J. Ray III, who oversaw Enron's bankruptcy, took over for Bankman-Fried. This week, Ray is also scheduled to testify before Congress. Ray stated in prepared remarks released on Monday that FTX went on a "spending binge" from late 2021 to 2022, spending approximately "$5 billion on a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them," and that the firm made more than $1 billion in "loans and other insiders."
Ray also confirmed media reports that FTX customer funds were mixed in with Alameda Research assets. Alameda used client funds to engage in margin trading, exposing them to massive losses, according to Ray.
If the federal government pursues wire or bank fraud charges, Bankman-Fried could face life in prison without the possibility of supervised release, according to legal experts. A punishment of this severity would be unusual but not extraordinary. Bernie Madoff, the mastermind behind the massive ponzi scheme, was sentenced to 150 years in prison, effectively a life sentence. The failure of FTX has already resulted in the demise of BlockFi Lending and has thrown the entire space into disarray.

Christopher J. Mitchell

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