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Sam Bankman-Fried arrested in the Bahamas after US prosecutors file charges

Sam Bankman-Fried arrested in the Bahamas after US prosecutors file charges

Sam Bankman-Fried arrested in the Bahamas after US prosecutors file charges

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Sam Bankman-Fried, the disgraced founder of collapsed cryptocurrency exchange FTX, was arrested in the Bahamas on Monday after U.S. prosecutors filed criminal charges.

“SBF’s arrest follows receipt of official notification from the United States that they have filed criminal charges against SBF and are likely to seek his extradition,” the Bahamian government said in a statement.

The arrest was the stunning latest development in one of the most dramatic falls from grace in the company’s recent history. Mr. Bankman-Fried, 30, was due to testify in Congress on Tuesday about the collapse of FTX, which was one of the most powerful companies in the emerging crypto industry until it virtually imploded overnight last month after a run on filings revealed an $8 billion hole in its accounts.

Prosecutors for the Southern District of New York confirmed Mr Bankman-Fried had been charged and said an indictment would be unsealed on Tuesday. Separately, the Securities and Exchange Commission said in a statement that it had authorized charges “relating to Mr. Bankman-Fried’s violations of our securities laws.”

The criminal charges against Mr Bankman-Fried included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, a person familiar with the matter said. affair.

Mr Bankman-Fried, who was the only person charged in the indictment, was taken into custody by Bahamian authorities, the person said. He was arrested shortly after 6 p.m. at his apartment complex in the Bahamas resort town of Albany, according to a Bahamian police statement. When Mr Bankman-Fried might be transferred to the United States was unclear. While the Bahamas has an extradition treaty with the United States, the process can take weeks, and sometimes much longer if a defendant disputes it.

Mr Bankman-Fried was cooperative with the arrest, according to a person familiar with the matter, and will be held overnight in a cell at a police station. He is due to appear in court in Nassau, the capital of the Bahamas, on Tuesday.

A spokesperson for Mr. Bankman-Fried declined to comment. Nicholas Biase, a spokesman for the U.S. Attorney’s Office, also declined to comment.

“Earlier tonight, Bahamian authorities arrested Samuel Bankman-Fried at the request of the United States government, based on a sealed indictment,” said Damian Williams, U.S. Attorney for the Southern District of New York, in a statement. “We expect to unseal the indictment in the morning and we will have more to say then.”

Once a golden boy of the crypto industry and a major donor to the Democratic Party, Mr. Bankman-Fried has watched his vast business and political empire crumble with breathtaking speed. His exchange filed for bankruptcy last month and his personal fortune has shrunk to virtually nothing. While he was once hailed as a modern-day John Pierpont Morgan, he is now more often compared to Bernie Madoff, who orchestrated the biggest Ponzi scheme in history.

Lawyers involved in the case expressed surprise at the suddenness of the arrest. Mr Bankman-Fried was expected to face a criminal charge. But complex cases of white-collar fraud can take months to come together. Until the arrest, Mr. Bankman-Fried was expected to testify remotely about the collapse of FTX during a hearing before the House Financial Services Committee on Tuesday. The hearing is still to proceed, just without Mr. Bankman-Fried’s testimony.

“The American public deserves to hear directly from Mr. Bankman-Fried about the actions that have harmed more than a million people,” Rep. Maxine Waters, who chairs the committee, said in a statement. “The public is anxiously awaiting these answers under oath before Congress, and the timing of this arrest robs the public of that opportunity.”

Several people familiar with the investigation said the speed with which authorities filed criminal and civil charges was an indication that prosecutors and regulators had received information from cooperating witnesses.

Mr. Bankman-Fried has come under scrutiny from dozens of regulators around the world, including the Department of Justice, the SEC and the Commodity Futures Trading Commission. Manhattan prosecutors investigated whether FTX broke the law by transferring billions of client funds to Alameda Research, a crypto hedge fund that Mr. Bankman-Fried also founded and owned.

They also focused on whether Mr. Bankman-Fried and his hedge fund engaged in market manipulation that may have contributed to the failure of two top cryptocurrencies last spring.

Since the collapse of FTX, the SEC and federal prosecutors have responded quickly to requests for documents from various parties, including some of the major financial firms that have invested up to $2 billion in the crypto exchange from the start. last year, two knowledgeable people said.

It’s unclear whether federal authorities plan to charge anyone else in connection with FTX’s collapse. It is not uncommon for a civil complaint to the SEC to reveal more information about the events leading up to the filing of charges than an indictment.

FTX’s meltdown began early last month when a run on deposits exposed an $8 billion hole in the company’s finances. Mr Bankman-Fried sought a lifeline from a rival firm, crypto exchange giant Binance, but the deal fell through after Binance looked at FTX’s books.

Mr. Bankman-Fried has quickly become a villain in the crypto industry. Hundreds of thousands of clients have funds trapped on FTX, with little chance of recovering them any time soon.

Surprisingly for an executive under criminal investigation, Mr. Bankman-Fried had given numerous media interviews following the collapse of FTX. At the recent DealBook Summit, a New York Times event, he blamed “huge management failures” and sloppy accounting for his company’s implosion, insisting he “never tried to commit a fraud” or to knowingly use funds from FTX clients to finance other investments.

When FTX filed for bankruptcy, Mr. Bankman-Fried resigned as chief executive. He was replaced by John Ray, a seasoned corporate turnaround expert who oversaw the breakup of energy trading company Enron after an accounting scandal in 2001.

In a bankruptcy filing last month, Mr Ray said the management of FTX reflected a “complete failure of corporate control”.

Mr Ray was also due to testify in the House on Tuesday. In a prepared statement, he said FTX had been a mess.

The collapse stemmed from “the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals”, he wrote.

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