Former FTX CEO Sam Bankman-Fried has been arrested in the Bahamas on U.S.-based accusations, the Bahamas Attorney General’s Office stated on Monday.
The attorney general’s office stated in a statement that the arrest of Bankman-Fried “following receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition.”
The U.S. Attorney’s Office for the Southern District of New York confirmed Bankman-detention, Fried’s citing a sealed indictment as the basis for the arrest. “We anticipate moving to unseal the indictment in the morning and will have more comments at that time,” the SDNY stated.
Due to the sealed indictment, the charges were not immediately apparent. Previously, the Associated Press reported that authorities and the Justice Department were examining whether FTX used customer funds to back dangerous wagers at Bankman-Alameda Fried’s Research hedge fund.
Following the news of Bankman-arrest, Fried’s the Securities and Exchange Commission announced that it had “approved separate charges related to [Bankman- Fried’s] violations of securities laws to be filed publicly tomorrow in SDNY.” The SEC contends that Bankman-Fried moved client monies from FTX to Alameda Research and utilized those funds for “fraudulent” purposes, such as real estate acquisitions and large political contributions.
Until this month, FTX was one of the world’s major bitcoin exchanges. As concerns about the exchange’s viability grew, users withdrew about $5 billion in crypto assets in a single day. On November 11, Bankman-Fried resigned and FTX filed for Chapter 11 bankruptcy protection.
Sam Bankman-Fried on August 17, 2022 in New York. Jeenah Moon/Bloomberg via Getty Images
John Ray III, who took over as CEO of FTX after a lengthy career that included overseeing the bankruptcy of Enron, stated in court documents the following week, “Never in my career have I witnessed such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
The court documents also said that Bankman-Fried and FTX failed to appropriately account for the value of FTX’s crypto assets and mismanaged FTX’s cash holdings.
“The lack of permanent records of decision-making is one of the most pervasive flaws of the FTX.com business,” Ray stated. Mr. Bankman-Fried frequently communicated using software that were programmed to destroy messages after a short time, and he encouraged his workers to do the same.
The arrest of Bankman-Fried occurs one day before he was scheduled to testify at a House hearing on the collapse of the cryptocurrency exchange. Last week, he stated he would be willing to appear before Congress, but cautioned that his remarks would be restricted and “not as useful” as he would want. Monday, just prior to his arrest, Bankman-Fried announced in a Twitter Spaces event that he would “phone in” to the hearing, according to Reuters.
Bankman-Fried was withdrawn from the witness list for Tuesday’s session following his arrest.
The chairwoman of the House Financial Services Committee, Maxine Waters, stated in a statement that she was “surprised” by the arrest.
Waters stated, “It’s about time the process to bring Mr. Bankman-Fried to justice has commenced.” “However, as the public is aware, my staff and I have been hard working for the past month to ensure Mr. Bankman-appearance Fried’s before our Committee tomorrow morning.”
Waters stated that although she feels Bankman-Fried should be “held accountable,” the timing of his arrest will prevent the public from hearing him testify under oath “about the actions that have injured over one million individuals and wiped out the life savings of so many”
Bankman-Fried was detained “without incident” and is expected to appear in court in the Bahamas on Tuesday, according to a statement from the Royal Bahamas Police Force.
Robert Legare, Pat Milton, and Khristopher J. Brooks contributed to the reporting for this article.