One month after the global cryptocurrency exchange FTX collapsed, Sam Bankman-Fried, the company’s co-founder and CEO, was arrested in the Bahamas at the request of the US government.
Bankman-Fried and his associates allegedly funneled customer deposits to their hedge fund, Alameda Research, for risky bets in faltering crypto companies. A Coindesk report on Nov. 2 noted that Alameda held a large swath of funds in FTT, FTX’s own cryptocurrency, triggering a run on the ersatz bank. By Nov. 10, FTX halted customer withdrawals; it sought bankruptcy protection the next day.
Damian Williams, the federal prosecutor in Manhattan, confirmed that he filed sealed charges against Bankman-Fried on Monday, Dec. 12, and said the indictment will be unsealed in the morning.
Williams’ announcement was preceded by a notice from the Bahamian authorities confirming the arrest:
“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”
After FTX filed for Chapter 11 protection, new CEO John Ray III bashed the company’s mismanagement in a court filing. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” wrote Ray, who led Enron through its bankruptcy proceedings.
Bankman-Fried had been scheduled to testify before the US House of Representatives on Tuesday, Dec. 13.
The US House Committee on Financial Services chairwoman Maxine Waters, who was tasked with organizing the hearing, reacted to the news in a press statement: “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity. While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened, and the Committee looks forward to beginning our investigation by hearing from Mr. John Ray III tomorrow.”
This story was updated with a comment from congresswoman Maxine Waters.