Sam Bankman Fried arrested in the Bahamas after charges were brought against US prosecutors

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

“Security Belt’s arrest followed official notification from the United States that it has filed criminal charges against Belt and will likely seek his extradition,” the Bahamas government said in a statement.

The arrest was the latest stunning development in one of the most dramatic falls from grace in the company’s recent history. Mr. Bankman-Fried was scheduled to testify in Congress on Tuesday about FTX breakdownwhich was one of the powerhouses in the nascent cryptocurrency industry until it virtually imploded overnight last month after a run on deposits exposed an $8 billion hole in its accounts.

Prosecutors in the Southern District of New York confirmed that Mr. Bankman-Fried has been charged, and said the indictment will open on Tuesday. Separately, the SEC said in a statement that it had authorized charges “related to Mr. Bankman Fried’s violations of our securities laws.”

A person familiar with the matter said that the criminal charges against Bankman Fred included wire fraud, conspiracy to wire fraud, securities fraud, conspiracy to commit securities fraud, and money laundering.

The person said Mr Bankman Freed, who was the only person charged in the indictment, was being taken into custody by Bahamas authorities. He was arrested shortly after 6 p.m. at his apartment complex in the resort town of Albany in the Bahamas, according to a statement from the Bahamas Police. The timing of Mr. Bankman-Fred’s transfer to the United States was not clear. While the Bahamas has an extradition treaty with the United States, the process can take weeks, sometimes much longer if a criminal defendant objects to it.

Mr. Bankman-Fried was cooperative during the arrest, according to a person familiar with the matter, and will be held overnight in a cell at a police station. On Tuesday, he is scheduled to appear in Magistrates Court in Nassau, the capital of the Bahamas.

Bankman spokesman Fred declined to comment. Nicholas Biasi, a spokesperson for the US Attorney’s Office, also declined to comment.

“Earlier this evening, Bahamas authorities arrested Samuel Bankman Fried at the request of the US government, pursuant to a sealed indictment,” Damien Williams, US Attorney for the Southern District of New York, said in a statement. “We expect to move to unveil the indictment in the morning and we will have more to say at that time.”

Once a golden boy in the cryptocurrency industry and a major donor to the Democratic Party, Mr. Bankman Fried It has seen his vast business and political empire crumble at dizzying speed. The exchange filed for bankruptcy last month, and his personal fortune has dwindled to almost nothing. While he used to be hailed as the modern-day John Pierpont Morgan, he is now more often likened to Bernie Madoff, who orchestrated the largest Ponzi scheme in history.

Lawyers involved in the case expressed their surprise at the surprise of the arrest. It was widely expected that Mr. Bankman-Fried would face criminal indictment. But complex white-collar fraud cases can take months to build. Until his arrest, Mr. Bankman-Fried was scheduled to testify remotely about the collapse of FTX in a hearing before the House Financial Services Committee on Tuesday. The hearing is still scheduled, without Mr Bankman-Fried’s testimony.

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

Several people familiar with the investigation said the speed with which authorities moved to file criminal and civil charges was an indication that prosecutors and regulators had tipped off cooperating witnesses.

Mr. Bankman Fried faces scrutiny from Dozens of organizers around the world, including the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. Manhattan prosecutors were examining whether FTX broke the law by funneling billions in client money to Alameda Research, a cryptocurrency hedge fund that Fred Bankman founded and also owns.

They also focused on whether Mr. Bankman Fred and his hedge fund engaged in market manipulation that may have helped cause the failure of two high-profile cryptocurrencies last spring.

Since the collapse of FTX, the Securities and Exchange Commission and federal prosecutors have moved quickly with requests for documents from various parties, including some major financial firms that invested as much as $2 billion in the cryptocurrency exchange beginning last year, two people familiar with the matter said.

It is not clear if federal authorities are looking to charge anyone else in connection with the FTX crash. It is not uncommon for a civil SEC complaint to reveal more information about the events leading up to the filing of the charges than the 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, cryptocurrency exchange giant Binance, but the deal fell through after Binance examined FTX’s books.

Mr. Bankman Fried has quickly become a villain in the cryptocurrency industry. Hundreds of thousands of customers have money trapped in FTX, with little prospect of getting it back anytime soon.

Surprisingly for an executive facing criminal investigations, Bankman-Fried gave numerous media interviews in the aftermath of FTX’s collapse. At a recent DealBook Summit, a New York Times event, he blamed “massive management failures” and inaccurate accounting for his company’s internal meltdown, insisting he “never attempted to commit fraud” or willfully dip into FTX clients’ funds to fund other investments.

When FTX declared bankruptcy, Bankman-Fred stepped down as CEO. He was replaced by John Ray, a veteran corporate turnaround expert who oversaw the dissolution of energy trading firm Enron after an accounting scandal in 2001.

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

Mr Wray was also scheduled to testify before the House of Representatives on Tuesday. in Prepared statementHe said that FTX was a mess.

The collapse came from “the utter concentration of control in the hands of a very small group of inexperienced and inexperienced individuals,” he wrote.