FTX founder and former chief executive Sam Bankman-Fried was arrested on 12 December in the Bahamas after the US filed criminal charges, the authorities in the two countries said.
Bankman-Fried, 30 years old, was arrested without incident shortly after 6pm EST at his apartment in Nassau, the Bahamas, said the Royal Bahamas Police Force in a statement.
The arrest was made based on a sealed indictment filed by the US attorney’s office for the Southern District of New York, the US attorney said. The charges in the indictment include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, according to a person familiar with the matter.
“We expect to move to unseal the indictment in the morning and will have more to say at that time,” said US Attorney Damian Williams in a statement.
The Bahamas police said he was taken into custody for charges of “various financial offences against laws of the United States, which are also offences against laws of the Commonwealth of the Bahamas”. He will appear in Magistrate Court on 13 December in Nassau, the police said.
Bankman-Fried is considering whether to contest extradition, said a person familiar with his thinking.
The arrest is the latest bombshell in a case that has transfixed Wall Street and Washington. FTX, one of the largest crypto exchanges in the world, filed for bankruptcy last month after it ran out of cash and rival Binance walked away from a shotgun merger. At this time last year, bitcoin prices were some three times their current level and Bankman-Fried was being lauded as the public face of a blossoming industry.
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The Securities and Exchange Commission also plans to sue Bankman-Fried early on 13 December in Manhattan federal court for violations of US securities laws, according to a statement from Gurbir Grewal, director of the SEC’s enforcement division. The SEC will accuse Bankman-Fried of committing civil securities fraud, a person familiar with the matter said.
Bankman-Fried was scheduled to testify before Congress on 13 December in a hearing probing the collapse of FTX, which appears to have resulted in the loss of billions of dollars of customer funds. Congressional aides said late 12 December they no longer expected Bankman-Fried to testify but that FTX’s current chief executive, John Ray III, would likely still appear before the committee.
Bankman-Fried has remained in the Bahamas since his company filed for bankruptcy. He moved FTX’s headquarters to Nassau, the capital of the Bahamas, from Hong Kong in 2021.
“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.
The Justice Department and the Securities and Exchange Commission have been investigating the company and have been in contact with company officials, The Wall Street Journal previously reported.
FTX experienced massive withdrawals as customers grew worried about its financial health this fall, and reports surfaced that the company had lent billions of dollars in customer assets to fund risky bets by Alameda Research, a crypto hedge fund controlled by Bankman-Fried.
Ray, FTX’s new chief executive, said in testimony prepared for the 13 December hearing that FTX’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”.
They failed to implement controls “that are necessary for a company that is entrusted with other people’s money or assets”, Ray wrote.
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Bankman-Fried has made a number of public appearances in recent weeks, and he has denied knowingly commingling customer funds with FTX’s own.
Bankman-Fried has been cooperating with Bahamian authorities since early November, according to court papers filed by the bankrupt FTX. A Bahamian court appointed liquidators to wind down FTX Digital Markets, a local subsidiary that housed FTX’s international exchange.
As the bankruptcy case has proceeded, FTX has found itself ensnared in a number of disputes with global regulators, some of whom have sought to seize the company’s assets on behalf of national customers. FTX has withheld some of their access to bank accounts and internal systems, citing the legal protections they are afforded by filing for bankruptcy in the US.
Lawyers for the Bahamian liquidators have for their part said Ray and his associates have withheld their access to corporate records, including Google Drive documents and Slack messages, which they require to identify the company’s assets and investigate potential claims.
As FTX was collapsing last month, Bankman-Fried tried to placate Bahamian authorities by offering to let customers in the country withdraw funds from the exchange even though withdrawals across FTX.com had been suspended, according to lawyers for the firm’s new management.
In court papers filed 12 December, they cited an email that Bankman-Fried wrote to the attorney general of the Bahamas on 9 November that FTX “would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole.”
Bankman-Fried then reopened withdrawals for more than 25 hours, allowing nearly $100m in cryptocurrency to be withdrawn from the exchange by “1,500 individuals and entities purporting to be Bahamian customers,” according to FTX’s filing.
“No other customers of FTX entities were given such an opportunity for preferential treatment,” according to FTX’s filing, which said it continues to investigate the identities of those who withdrew the crypto.
James Fanelli and Paul Kiernan contributed to this article
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