CEO Sam Bankman-Fried
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FTX founder Sam Bankman-Fried was arrested by Bahamian authorities Monday night after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, setting the stage for the extradition and trial in the United States for the one-time crypto billionaire at heart. of the collapse of the crypto exchange.
Before her arrest was announced, Bankman-Fried was expected to testify virtually before the House Financial Services Committee on Tuesday, but her lawyers told CNBC she would not testify.
His arrest is the first concrete move by regulators to hold people accountable for the multi-billion dollar FTX implosion last month.
Damian Williams, United States Attorney for the Southern District of New York, said on Twitter that the federal government anticipated moving to “unveil the indictment in the morning.” The New York Times reported that the charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, according to the New York Timesciting a person familiar with the matter.
Bahamas Attorney General Ryan Pinder said it was “likely that the United States would request his extradition.” The Royal Bahamas Police Force confirmed his arrest and said he will appear before magistrates court in Nassau on Tuesday.
In a statement, Bahamian Prime Minister Philip Davis said: “The Bahamas and the United States have a shared interest in holding accountable all persons associated with FTX who may have betrayed the public trust and violated the law.”
“While the United States files criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the FTX collapse, with the continued cooperation of its regulatory and law enforcement partners in the United States and elsewhere,” it continued. the statement.
Bahamian regulators and FTX lawyers had been engaged in a bitter battle in chambers and in the court of public opinion. The Monday before, FTX Attorneys Indicted the Bahamian government of allegedly working with Bankman-Fried to move FTX assets out of company control and into crypto wallets controlled by Bahamian regulators.
Bankman-Fried’s arrest by Bahamian law enforcement, as well as his expected extradition, suggest that close cooperation between the Bahamas and the US will continue to evolve throughout the process. The Bahamas and the United States have had an extradition treaty since the early 20th century, when the Bahamas was still under British control. The current treaty was signed in 1990 and requires the requesting party to provide an arrest warrant issued by a judge or “other competent authority.”
In November, FTX and its affiliates filed for bankruptcy, and Bankman-Fried resigned as chief executive. The crypto firm’s trading imploded in spectacular fashion after a run on assets Similar to a bank run.
FTX’s collapse was precipitated when CoinDesk reports revealed a highly concentrated position in self-issued FTT coins, which Bankman-Fried’s hedge fund Alameda Research used as collateral for billions in crypto loans. Binance, a rival exchange, announced that it would sell its stake in FTT, prompting a massive withdrawal of funds. The company froze assets and declared bankruptcy days later. Subsequent reports claimed that FTX had mixed client funds with Bankman-Fried’s crypto hedge fund Alameda Research, losing billions in client deposits along the way.
Bankman-Fried was succeeded by John J. Ray III, who had overseen Enron’s bankruptcy. Ray is also scheduled to testify before Congress this week. prepared remarks released on mondayRay said FTX had a “spending party” from late 2021 through 2022, when approximately “$5 billion was spent buying a wide variety of companies and investments, many of which may be worth only a fraction of what they are worth.” that was paid for them”. and that the company made more than $1 billion in “loans and other payments… to insiders.”
Ray also confirmed media reports that FTX client funds were mixed with Alameda Research assets. Alameda used client funds to make margin transactions, which exposed them to massive losses, Ray said.
Legal experts told CNBC that if the federal government presses wire or bank fraud charges, Bankman-Fried could face life in prison without the possibility of supervised release. Such a severe punishment would be unusual but not extraordinary. The mastermind behind the Ponzi scheme, Bernie Madoff, was sentenced to 150 years in prison, an effective life sentence, for his massive ponzi scheme. The FTX collapse has already caused the demise of BlockFi Lending and thrown the entire space into disarray.
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