The arrest marks a stunning fall from grace for Sam Bankman-Fried, a 30-year-old entrepreneur who rode a boom in bitcoin and other digital assets to become a billionaire many times over until FTX’s rapid demise. — AFP
NEW YORK: FTX founder Sam Bankman-Fried was arrested in the Bahamas at the behest of US prosecutors on Monday, the day before he was due to testify before Congress about the abrupt failure last month of one of the world’s largest cryptocurrency exchanges.
The arrest marks a stunning fall from grace for the 30-year-old entrepreneur who rode a boom in bitcoin and other digital assets to become a billionaire many times over until FTX’s rapid demise.
The exchange, launched in 2019 and based in the Bahamas, filed for bankruptcy Nov 11 after it struggled to raise money to stave off collapse as traders rushed to withdraw US$6bil (RM26.59bil) from the platform in just 72 hours.
The arrest came as Bankman-Fried prepared to lash out at his former lawyers at Sullivan and Cromwell, new FTX CEO John Ray and rival exchange operator Binance at a Congressional hearing.
In the testimony, a draft copy of which was seen by Reuters, Bankman-Fried planned to say he was pressured by Sullivan and Cromwell lawyers to nominate Ray as CEO following the sudden exodus of customer funds. And when within minutes he changed his mind, following an offer of billions of dollars of fresh funding, he was told it was too late.
It is unclear, however, whether Bankman-Fried will get to testify. US prosecutors in Manhattan said they had a sealed indictment against Bankman-Fried and charges would be revealed soon. The New York Times reported Bankman-Fried faces fraud and money laundering charges.
“I’m sorry,” Bankman-Fried wrote in the draft testimony.
Bankman-Fried and his lawyer Mark Cohen did not immediately respond to requests for comment, nor did Sullivan and Cromwell, FTX, Ray and Binance.
The attorney-general’s office for the Bahamas said it proceeded with the arrest after receiving formal confirmation of charges against Bankman-Fried, adding it expects he will be extradited to the United States.
A statement from the Bahamas Police said Bankman-Fried had been arrested shortly after 6pm Monday (2300 GMT) at his apartment complex, located in Albany, in the Bahamian capital of Nassau.
“He was arrested in reference to various Financial Offences against laws of the United States, which are also offences against laws of the Commonwealth of The Bahamas,” the statement said, adding that he was taken into custody without incident and will have appear in Nassau’s Magistrate Court.
A spokesman for the US Attorney’s office in Manhattan confirmed Bankman-Fried had been arrested but declined to comment on the charges.
“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US government, based on a sealed indictment filed by the United States Attorney’s Office for the Southern District of New York,” US prosecutor Damian Williams said in a statement.
“We expect to move to unseal the indictment in the morning and will have more to say at that time.”
The US Securities and Exchange Commission separately authorised charges relating to Bankman-Fried’s violations of securities laws, the regulator said on Monday.
Bankman-Fried’s indictment by US authorities comes as the Justice Department is considering charges against a far bigger player in the crypto world, industry-leading exchange Binance.
Reuters reported Monday that some Justice Department prosecutors believe they have gathered sufficient evidence in their long-running investigation of Binance to charge the company and some top executives.
Binance is under investigation for possible money-laundering and sanctions violations, Reuters has reported. Others in the department have argued for taking time to review more evidence, four people familiar with the matter told Reuters.
FTX’s liquidity crunch came after Bankman-Fried secretly moved US$10bil (RM44.3bil) of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter. At least US$1bil (RM4.43bil) in customer funds had vanished, the people said.
Bankman-Fried told Reuters the company did not “secretly transfer” but rather misread its “confusing internal labelling.” Asked about the missing funds, he responded: “???” — Reuters
