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Former FTX CEO Sam Bankman-Fried arrested in the Bahamas

Former FTX CEO Sam Bankman-Fried arrested in the Bahamas

Looks like embattled FTX CEO Sam Bankman-Fried won’t be testifying before Congress after all. Bahamas Attorney General’s Office announced Monday that Bankman-Fried has been arrested and is likely to be extradited on a short-term basis to the United States for trial. The AG’s office noted that his arrest came after “the receipt of official notification from the United States that they have filed criminal charges against SBF and are likely to seek his extradition.”

News of his arrest should come as no surprise given that last Friday, the Justice Department came out and said it was looking “closely” its role in the the recent collapse of a multi-billion cryptocurrency exchange, which is expected to harm more than one million individual investors. Justice Department officials made the statements during a meeting with the crypto exchange bankruptcy team to discuss if FTX had incorrectly moved hundreds of millions of dollars just before its declared bankruptcy last November.

Bankman-Fried was scheduled to testify before Congress on Tuesday before the House Financial Services Committee. However, as US Attorney Damian Williams explained in a tweet on Monday, Bankman-Fried was taken into custody “based on a sealed indictment”, which will be revealed and explained in the morning.

“Obviously I made a lot of mistakes. There are things I would give anything to be able to do them again,” Bankman-Fried recently tried to explain to the New York Times. “I never tried to defraud anyone.”

The Bahamas government is also accused of collusion – not by the DoJ, but rather by FTX itself. Lawyers for the company affirmed monday (prior to the news of the arrest) that the Bahamas, as a government entity, had colluded with Bankman-Fried to help transfer the ill-gotten funds from all those suspicious transactions that took place just before the bankruptcy in crypto-wallets controlled by Bahamian regulators.

Bankman-Fried resigned as CEO of FTX in November and was replaced by John J. Ray III, an executive who also led Enron through its own bankruptcy proceedings. In his remarks prepared for the now postponed Congressional hearings from TuesdayRay painted a grim picture of FTX’s endgame management and operations.

In it, he says that FTX spent $5 billion in late 2021 and early 2022, “buying myriad businesses and investments, many of which are worth a fraction of what was paid for them,” as well as making numerous loans and payments amounting to more than a billion dollars, “to insiders”. Those funds were also mingled with money from Bankman-Fried’s other business, Alameda Research, which also used client funds to engage in high-risk margin trading.

Depending on what the Southern District Attorney’s Office will disclose tomorrow, Bankman-Fried could be out for a very long time. Banking and bank fraud on this scale would put Bankman-Fried at risk of death without parole, according to a CNBC legal panel. Former Theranos CEO Elizabeth Holmes and COO Sunny Balwani have just been sentenced to 11 and 12 years in prison, respectively, for their roles in the medical company’s massive fraud case. Ponzi scheme kingpin Bernie Madoff was given 150 years for his schemes in 2009, and in 2006 Jeff Skilling was given 24 years for his role in bringing down Enron.

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