Following weeks of speculation that client funds had been misused before his empire collapsed, Sam Bankman-Fried was arrested in the Bahamas after the US government filed a criminal indictment against him.
In a statement issued Monday, Ryan Pinder, the island nation’s attorney general, said Bankman-Fried is being held in custody pending extradition.
In a separate statement, US attorney for the Southern District of New York Damian Williams said federal prosecutors will unseal the case against him Tuesday morning. The allegations were not elaborated upon by him.
Bankman-Fried’s violations of securities laws were separately authorized by the Securities and Exchange Commission, Enforcement Director Gurbir Grewal said. According to the statement, the civil charges are expected to be filed publicly in Manhattan on Tuesday.
A range of possible misconduct has been investigated against Bankman-Fried in the US and the Bahamas, where FTX had its headquarters. A key question has been whether Bankman-Fried loaned customer funds to trading firm Alameda Research. On Nov. 11, more than 100 FTX-related entities filed for bankruptcy protection in the US.
‘Powerful Evidence’
Former federal prosecutor Gene Rossi said: “To indict this early shows they have very strong evidence.” He added that prosecutors were probably concerned Bankman-Fried would flee to a country where he couldn’t be extradited.
In response to the arrest and charges, the White House declined to comment.
According to Maxine Waters, chairwoman of the House Financial Services Committee, the panel still plans to hold a hearing on FTX’s collapse. FTX and what was going on need to be understood by the American public, she said.
Bankman-Fried, 30, is being held at the Cable Beach police station in Nassau, according to an officer working at the facility. The person, who declined to give a name when reached by phone, said that all the cells there are comfortable, but didn’t provide details.
Crypto Exchanges
Prior to the arrest and long before his empire collapsed into bankruptcy, federal prosecutors in Manhattan had already been looking into FTX as part of broader sweep of exchanges and potential anti-money laundering violations under the Bank Secrecy Act.
The investigation, led by the Complex Frauds and Cybercrime Unit, took a different trajectory after FTX’s catastrophic implosion. Prosecutors were closely examining whether hundreds of millions of dollars were improperly transferred to the Bahamas around the time of FTX’s Nov. 11 bankruptcy filing in Delaware, according to a person familiar with the matter.
They were also digging into whether FTX broke the law by transferring funds to Alameda Research, the bankrupt investment firm also founded by Bankman-Fried, Bloomberg reported previously.
Last week, prosecutors, the FBI, Department of Justice officials and FTX’s new CEO and restructuring expert Ray met at SDNY’s headquarters in downtown Manhattan. Potential charges were not discussed at that meeting, according to a person familiar with the conversation.
The facility is about 13 miles from the Albany Bahamas luxury community where Bankman-Fried lives and is located close to a main tourist zone. Bankman-Fried’s arraignment is scheduled for Tuesday, according to a person familiar with the matter.
In media interviews since FTX’s collapse, Bankman-Fried has admitted major managerial missteps, but has also claimed that he never tried to commit fraud or break the law.
In his remarks prepared for the US House hearing that Bankman-Fried was scheduled to appear at on Tuesday, he offered a blunt assessment of his plight.
“I would like to start by formally stating under oath: I f—-ked up,” Bankman-Fried said in draft copy of his remarks obtained by Bloomberg News.
He added that the company’s new managers, led by restructuring expert John J. Ray III, have repeatedly rebuffed his offers to help sift through the wreckage of the collapsed crypto empire. Ray, who’s now leading the company, hasn’t responded to five of his emails, he said.