Sam Bankman-Fried, the founder of the defunct cryptocurrency exchange FTX, was arrested by Bahamian authorities this evening after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government.
This will pave the way for his extradition and trial in the United States.
U.S. Attorney for the Southern District of New York Damian Williams tweeted that the federal government planned to “unseal the indictment in the morning.”
Attorney General Ryan Pinder of the Bahamas stated that the United States had filed criminal charges against Bankman-Fried but did not elaborate. The United States was “likely to request his extradition.”
To quote Bahamian Prime Minister Philip Davis: “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.”
The statement went on to say that while the U.S. is pursuing criminal charges against SBF individually, the Bahamas is continuing its own regulatory and criminal investigations into the collapse of FTX with the continued cooperation of its law enforcement and regulatory partners in the U.S. and elsewhere.
The Bahamian government and FTX’s legal team had been battling it out in court and the court of public opinion. On Monday, FTX’s legal team again claimed that the Bahamian government colluded with Bankman-Fried to divert FTX funds from the company’s control and into Bankman-personal Fried’s cryptocurrency wallets. The arrest of Bankman-Fried by Bahamian authorities and the subsequently expected extradition to the United States indicate the continued development of close cooperation between the Bahamas and the U.S. throughout the bankruptcy proceedings.
Before his arrest this evening, Bankman-Fried was scheduled to appear before the House Financial Services Committee tomorrow to give testimony. His arrest marks the first real step taken by authorities to bring those responsible for last month’s multibillion-dollar collapse of FTX to justice.
After FTX and its subsidiaries filed for bankruptcy in November, Bankman-Fried resigned as CEO. A similar to a bank run asset run caused the crypto trading firm to implode spectacularly.
Bankman-Alameda Fried’s Research hedge fund used self-issued FTT coins as collateral for billions in crypto loans, which CoinDesk reported on, triggering the collapse of FTX. A “bank run”-style massive withdrawal of funds occurred after competing exchange Binance announced it would sell its stake in FTT. The business froze its assets and filed for bankruptcy a few days later. Later reports suggested that FTX had lost billions of dollars in customer deposits by mixing them with Alameda Research, Bankman-crypto Fried’s hedge fund.
Former Enron bankruptcy trustee John J. Ray III succeeded Bankman-Fried. According to Ray’s prepared remarks released Monday, FTX went on a “spending binge” from late 2021 to early 2022. During that time, “roughly $5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for.” The company also made “loans and other payments…to insiders” totaling over $1 billion. It is expected that Ray will also appear before Congress to give testimony this week.
Ray also confirmed the mixing of FTX customer funds with Alameda Research assets, as had been reported by the media. According to Ray, Alameda’s use of client funds for margin trading left them vulnerable to catastrophic losses.
According to interviews with legal experts conducted by NFT Today Magazine, Bankman-Fried faces life in prison without the possibility of supervised release if the federal government pursues charges of wire or bank fraud. A punishment as severe as this one is not unprecedented, but it is rare. Bernie Madoff, the mastermind behind a massive Ponzi scheme, was given a life sentence (150 years) in prison. The failure of FTX has already resulted in the demise of BlockFi Lending and has thrown the whole industry into chaos.
Marine Corps Veteran-turned-national-tv-personality Eric Mitchell is a world leading expert in sports media, regularly appearing on the world’s largest outlets from BBC, MSNBC, Fox News, Bloomberg, CNN and more. His signature blend of snark and industry expertise landed him columns at none other than RollingStone, GritDaily, PopWrapped, Disrupt — and most recently — Editor in Chief at NFT Today Magazine. When he’s not making media appearances or running his empire at LifeFlip Media, he can be found entertaining his thousands of loyal followers on social media through his authentic filter-free content.
