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FTX founder Sam Bankman-Fried’s collapsed cryptocurrency empire triggered a wave of demands for regulations on the crypto industry. After the FTX catastrophe, the billionaire resigned as CEO, filed for bankruptcy protection and was spotted in the Bahamas, where FTX Digital Markets is based.
Meanwhile, US prosecutors have investigated him for potential money laundering violations because there have been reports that Bankman-Fried secretly funneled US$10 billion of FTX’s customers’ funds into his sister trading company, Alameda Research, which is run by his girlfriend, Caroline Ellison. Bankman-Fried has admitted to mismanaging FTX and not paying enough attention to risk, but he also says he never tried to commit fraud or break the law.
On Monday, Bankman-Fried was arrested in the Bahamas by local law enforcement after US prosecutors filed criminal charges against him. The indictment was unsealed on Tuesday and includes eight criminal counts like wire fraud, wire fraud conspiracy, securities fraud, securities fraud and money laundering. Prosecutors also said that Bankman-Fried had been engaging in criminal activity since 2019. During his first court since being arrested in the Bahamas later that day, an attorney of his pitched for Bankman-Fried to pay US$250,000 in cash bail and wear an ankle bracelet instead of staying in jail.
The FTX founder is expected to be extradited to the US because of a treaty with the Bahamas in place since 1994. But his lawyer also said that his client would fight this.
Bankman-Fried “agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research,” wrote the indictment.
“I didn’t knowingly commit fraud,” said Sam Bankman-Fried, FTX founder, to the BBC. “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” said Bankman-Fried's attorney Mark Cohen, in a statement.
“Although Mr Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr Bankman-Fried about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many,” said US Representative Maxine Waters, referring to Bankman-Fried’s decision to call in rather than appear at a hearing before the House financial services committee on Tuesday. “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.”