FTX founder Sam Bankman-Fried was arrested by Bahamian authorities this evening after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, setting the stage for extradition and U.S. trial for the onetime crypto billionaire at the heart of the crypto exchange’s collapse.
Bankman-Fried was expected to testify before the House Financial Services Committee on Tuesday. His arrest is the first concrete move by regulators to hold individuals accountable for the multi-billion dollar implosion of FTX last month.
Bahamas Attorney General Ryan Pinder said that the United States was “likely to request his extradition.”
In a statement, Bahamian Prime Minister Philip Davis said, “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.”
“While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere,” continued the statement.
Bahamian regulators and FTX’s attorneys had been engaged in a bruising battle in chambers and in the court of public opinion. Earlier Monday, FTX attorneys accused the Bahamian government of allegedly working with Bankman-Fried to spirit away FTX assets from company control and into into crypto wallets controlled by Bahamian regulators. Bankman-Fried’s arrest by Bahamas law enforcement, as well as his expected extradition, suggest that close cooperation between the Bahamas and the U.S. will continue to evolve throughout the bankruptcy proceedings.
FTX’s collapse was precipitated when reporting from CoinDesk 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 it would sell its stake in FTT, spurring a massive withdrawal in funds. The company froze assets and declared bankruptcy days later. Reports later claimed that FTX had commingled customer funds with Bankman-Fried’s crypto hedge fund, Alameda Research, and that billions in customer deposits had been lost along the way.
Bankman-Fried was replaced by John J. Ray III, who had overseen Enron’s bankruptcy. Ray is also scheduled to testify before Congress this week. In prepared remarks released Monday, Ray said that FTX went on a “spending binge” from late 2021 through 2022, when approximately ”$5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them,” and that the firm made more than $1 billion in “loans and other payments...to insiders.”
Ray also confirmed media reports that FTX customer funds were commingled with assets from Alameda Research. Alameda used client funds to do margin trading, which exposed them to massive losses, Ray said.
