SBF arrested in the Bahamas as U.S. Justice, SEC file criminal charges ahead of Congressional hearing
(Kitco News) - Former FTX CEO Sam Bankman-Fried was arrested in the Bahamas on Monday evening as the U.S. government moved from requests and negotiations to criminal charges and extradition arrangements ahead of today’s Congressional hearing into the collapse of the exchange.
The Bahamas’ Office of the Attorney General made the arrest announcement shortly after 6 pm EST. They said they arrested SBF after being told by the U.S. government that “it has filed criminal charges against SBF and is likely to request his extradition.” While some in the crypto ecosystem suspected the Bahamas did it to help SBF avoid testifying at today’s first Congressional hearing and to prevent the U.S. from taking him into custody themselves, the announcement leaves no room for this interpretation.
“As a result of the notification received and the material provided therewith, it was deemed appropriate for the attorney general to seek SBF's arrest and hold him in custody pursuant to our nation's Extradition Act,” they wrote. “At such time as a formal request for extradition is made, The Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States.”
Within minutes of the Bahamas’ announcement, the U.S. Department of Justice issued a terse statement of their own.
USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.— US Attorney SDNY (@SDNYnews) December 12, 2022
The Justice charges as of Tuesday morning include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.
And not to be left out, the U.S. Securities and Exchange Commission also issued a press release early Tuesday morning outlining separate criminal charges against Bankman-Fried. “The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX), the crypto trading platform of which he was the CEO and co-founder.”
The SEC wrote that since 2019, SBF “raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors” by representing FTX as “a safe, responsible crypto asset trading platform,” where “in reality, Bankman-Fried orchestrated a years-long fraud to conceal from FTX’s investors (1) the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund; (2) the undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit” funded by the platform’s customers and exempting Alameda from certain key FTX risk mitigation measures; and (3) undisclosed risk stemming from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens.”
The statement also claims that Bankman-Fried used customer funds “to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
"We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," wrote SEC Chair Gary Gensler. "To those platforms that don’t comply with our securities laws, the SEC’s Enforcement Division is ready to take action."
The cryptosphere will now turn its attention to this morning’s hearing by the House Committee on Financial Services into the collapse of SBF’s former exchange. “While I am disappointed that we will not be able to hear from Mr. Bankman-Fried... we remain committed to getting to the bottom of what happened, & the Cmte looks forward to beginning our investigation by hearing from Mr. John Ray III tomorrow,” Chairwoman Maxine Waters wrote in a tweet following the arrest announcement.