Sam Bankman-Fried, the founder of the defunct cryptocurrency exchange FTX, was arrested by Bahamian authorities on Monday evening after the US Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. This paves the way for his extradition and trial in the United States.
Prior to his arrest, Bankman-Fried was supposed to give an online testimony before the House Financial Services Committee on Tuesday. However, his attorneys have informed CNBC that he will not be appearing. His arrest is the first concrete step taken by the authorities to apprehend people in charge of FTX’s multibillion-dollar collapse last month.
United States Attorney for New York Damian Williams tweeted that the indictment would be made public the following morning. The allegations include money laundering, securities fraud, wire fraud, and securities fraud conspiracy, according to the New York Times, which cited a source familiar with the matter.
According to Bahamas Attorney General Ryan Pinder, U.S. officials have stated that they are “certain to request his extradition.” The Royal Bahamas Police Force verified his arrest, and he will show up in Nassau Magistrate Court on Tuesday.
The Bahamas and the United States have a common interest in holding accountable all FTX associates who may have violated the public trust and broken the law, according to Bahamas Prime Minister Philip Davis.
The Bahamas will continue its regulatory and criminal investigations into the FTX collapse with the help of its law enforcement and regulatory colleagues in the US and around the world, according to the statement.
In courtrooms and the court of public opinion, a tense conflict has been going on between Bahamian authorities and FTX’s counsel. The legal team for FTX asserted on Monday that Bankman-Fried and the Bahamian government had worked together to transfer the company’s bitcoin holdings from its own wallets to the government’s.
The detention of Bankman-Fried by Bahamian officials and his upcoming extradition to the United States show how closely the two nations continue to work together during the bankruptcy processes. In force since the early 20th century, when the Bahamas were still governed by the British, is an extradition agreement between the two nations. Under the current convention, which was signed in 1990, the requesting state must show an arrest warrant issued by a judge or “other competent authority.”
After FTX and its subsidiaries filed for bankruptcy in November, Bankman-Fried announced his resignation as CEO of the company. The crypto trading company crashed spectacularly due to an asset run that was akin to a bank run.
According to CoinDesk, Bankman-hedge Fried’s fund Alameda Research used self-issued FTT coins as collateral for a huge amount of cryptocurrency loans, which led to the demise of FTX. A significant amount of capital was evacuated as a result of the competing exchange Binance’s decision to sell its interests in FTT. A few days later, the company declared bankruptcy and froze its assets. Later reports claimed that when FTX allegedly combined their funds with those of Bankman-crypto Fried’s hedge firm, Alameda Research, billions in customer deposits had disappeared.
John J. Ray III succeeded Bankman-Fried and was in charge of Enron’s bankruptcy petition. Ray is also scheduled to address Congress this week. In prepared remarks that Ray released on Monday, he asserted that FTX went on a “spending binge” from late 2021 to early 2022, spending about “$5 billion buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for,” and giving more than $1 billion in “loans and other payments…to insiders.”
Ray also disclosed to the public that the assets of Alameda Research included monies from FTX customers. Ray claims that by using customer money for margin trading, Alameda assumed a significant amount of risk.
If the federal government decides to pursue wire or bank fraud charges against Bankman-Fried, she may be facing life in prison without the possibility of supervised release. Though uncommon, a sentence of this seriousness is not unheard of. The greatest ponzi scheme in history’s instigator, Bernie Madoff, was sentenced to life in jail (really 150 years). Due to FTX’s bankruptcy, BlockFi Lending has already passed away, and the entire business is in ruins.
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