Sam Bankman-Fried, a former FTX CEO, was detained in the Bahamas. Let’s see Why was FTX founder Sam Bankman-Fried arrested and What was the crime in detail.
Why was Sam Bankman-Fried arrested?
Sam Bankman-Fried was detained on Monday in The Bahamas after being accused criminally by US prosecutors. Bankman-Fried developed and oversaw FTX until a liquidity crisis caused the cryptocurrency exchange to file for bankruptcy last month.
The 30-year-old entrepreneur, who benefited from the cryptocurrency boom to build one of the biggest cryptocurrency exchanges and whose net worth Forbes estimated to be $26.5 billion a year ago, has experienced a remarkable fall from grace as a result.
The Bahamas-based exchange, which debuted in 2019, filed for bankruptcy on November 11 after finding it difficult to secure capital to avoid collapsing as traders rushed to withdraw $6 billion off the platform in just 72 hours.
After getting official confirmation of the accusations against Bankman-Fried, the Bahamas’ attorney general’s office said it went forward with the arrest and added that it anticipates he would be extradited to the US.
Bankman-Fried was detained at his apartment complex in Albany, Nassau, The Bahamas, soon after 6 p.m. on Monday (4.30 a.m. IST), according to a statement from The Bahamas Police.
Reason for the detention
The statement added that he was taken into custody without incident and will appear in Nassau’s Magistrate Court on Tuesday. “He was arrested for various Financial Offences against laws of the United States, which are also offenses against laws of the Commonwealth of The Bahamas,” the statement said. Bankman-Fried was detained in The Bahamas, according to a representative for the US Attorney’s office in Manhattan, who declined to comment on the charges.
According to a sealed indictment submitted by the US Attorney’s Office for the Southern District of New York, Samuel Bankman-Fried was detained by Bahamian authorities earlier this evening at the US Government’s request, according to a statement from US attorney Damian Williams. “We expect to move to unseal the indictment in the morning and will have more to say at that time.”
The Department of Justice is exploring charges against Binance, the top exchange in the cryptocurrency market, at the same time as US officials have indicted Bankman-Fried.
According to Reuters, some Justice Department officials think they have enough evidence in their extensive investigation of Binance to bring charges against the firm and some of its top executives.
“We don’t have any insight into the inner workings of the US Justice Department, nor would it be acceptable for us to comment if we did,” a Binance spokeswoman told Reuters in response to the news.
According to Reuters, Binance is being looked at for potential money laundering and sanctions violations. Four people with knowledge of the situation told Reuters that other department members have argued in favor of devoting time to reviewing further evidence.
Additionally, the arrest occurred a day before Bankman-Fried was supposed to testify before US senators on Tuesday and deliver a video link testimony.
In the first of several hearings to explore the collapse of FTX, which started at 10 am ET, Bankman-Fried and current FTX CEO John Ray were scheduled to testify before the US House Financial Services Committee (8.30 pm IST).
Investigations
According to Reuters, which cited two persons with knowledge of the situation, Bankman-Fried secretly transferred $10 billion of FTX customer funds to his private trading company, Alameda Research, which led to FTX’s liquidity crisis. The folks claimed that at least $1 billion in client funds had disappeared.
According to Bankman-Fried, Reuters was misled by the company’s “confusing internal labeling” rather than a “secret transfer.” He was asked about the missing money, and he said, “???
Bankman-Fried acknowledged risk management mistakes in a series of interviews and public appearances in late November and early December but sought to remove himself from fraud claims by claiming he never purposefully mixed customer cash on FTX with funds at Alameda.
Bankman-Fried’s statement on a Interview
In a Nov. 30 interview at the New York Times Dealbook Summit, Bankman-Fried stated, “I didn’t ever try to commit fraud,” adding that he does not believe he is directly responsible for any crimes. The day before FTX filed for bankruptcy, Bankman-Fried gave notice of her resignation as CEO.
FTX’s handling of customer cash is the subject of an investigation being conducted by the US Attorney’s Office in Manhattan. It was being overseen by veteran securities fraud prosecutor Williams, Reuters was informed by a source familiar with the case. Inquiries have also been launched by the Securities and Exchange Commission and Commodity Futures Trading Commission.
US cryptocurrency investors sued Bankman-Fried as well, claiming he and several celebrities who advocated FTX engaged in dishonest business practices, causing the investors to lose $11 billion.
The collapse of FTX was the latest upheaval for the cryptocurrency market this year. A spate of meltdowns that have brought down other significant businesses like Voyager Digital and Celsius Network has caused the total cryptocurrency market to decline.
JUST IN: Sam Bankman-Fried "could be looking at life in prison" if convicted. pic.twitter.com/3hxOqW3xS1
— Watcher.Guru (@WatcherGuru) December 13, 2022
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Lavanya (Senior Editor) is a full-time content writer with almost 5 years of experience and a part-time teacher. She joined Medico Topics on the Breaking News trainee scheme in 2022 and now works on MedicoTopics.com. As a lifelong learner, She is constantly curious about learning new things and passionate about sharing knowledge with people through her writing and teaching.