Crypto forme rCEO Sam Bankman-Fried arrested in Bahamas

Sam Bankman-Fried was arrested in the Bahamas on Monday in the wake of the spectacular failure of his cryptocurrency exchange FTX.

He was expected to be extradited to the U.S. after the bust, which came at the request of federal prosecutors in Manhattan.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by the United States attorney’s office for the Southern District of New York,” Damian Williams, U.S. attorney for the Southern District of New York, said in a statement. “We expect to move to unseal the indictment in the morning and will have more to say at that time.”

Bankman-Fried, 30, stepped down from FTX as it imploded last month when investors demanded their funds back and the company was unable to pay. The $32 billion firm filed for Chapter 11 bankruptcy protection on Nov. 11, and John Ray III took over.

Bankman-Fried had been expected to testify alongside Ray, the attorney who oversaw Enron’s liquidation, before the House Financial Services Committee on Tuesday. The panel’s plans were not immediately known in the wake of the arrest.

The bust was seen as a first step for regulators seeking to hold individuals accountable for FTX’s failure. Several celebrities who promoted the company — including comedian Larry David, who starred in a Super Bowl ad for FTX — are being sued by investors alleging they were defrauded.

Bankman-Fried said last month that he had not intended to rip anyone off and did not “knowingly” misuse millions of customers’ funds. He also said the clients who are scrambling for their dough would eventually get their money back.

FTX, which is based in the Bahamas, was founded in 2019 and quickly made Bankman-Fried the poster child of cryptocurrency.

His fall from grace has shocked members of the industry, who once thought he might become the first trillionaire in the world.

Bahamian authorities said they are also investigating the crypto exchange.

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“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,” Bahamian Prime Minister Philip Davis said in a statement obtained by CNBC.

Ray, FTX’s new CEO, says the firm’s practices were even worse than those of Enron, the giant energy company that crumbled in 2001.

“FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” he said in remarks he prepared for Tuesday’s congressional hearing.

FTX’s failure has prompted talk of new regulations for the industry.

Two bills introduced by U.S. Rep. Ritchie Torres (D-N.Y.) would require cryptocurrency exchanges to take measures to prevent something like the FTX collapse from happening again. Crypto exchanges would be forbidden to lend their customers’ money without the clients’ consent, and some of those exchanges would have to report the amounts of their assets and liabilities to the government.

With News Wire Services