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FTX Founder Sam Bankman-Fried, Once Hailed as Crypto King, Arrested in the Bahamas

By: Shankhyaneel Sarkar

News18.com

Last Updated: December 13, 2022, 10:19 IST

Washington/Nassau

Sam-Bankman-Fried-Arrested-Latest-News: FTX Founder Sam-Bankman Fried has been arrested from his apartment complex in Nassau, Bahamas (Image: AP Photo/ABC News)

Sam-Bankman-Fried-Arrested-Latest-News: FTX Founder Sam-Bankman Fried has been arrested from his apartment complex in Nassau, Bahamas (Image: AP Photo/ABC News)

Sam Bankman-Fried has been arrested in Bahamas: The young CEO who slept on bean bags and sported baggy shorts oversaw the fall of crypto exchange FTX

Following a request from the United States, the Bahamas police arrested cryptocurrency tycoon Sam Bankman-Fried.

The US is seeking to charge him for wire fraud, securities fraud, money laundering and related conspiracy charges following the collapse of the FTX platform, which led to millions of investors losing their hard-earned money.

The disgraced crypto tycoon was scheduled to appear at a US Congress hearing where he was expected to testify under oath on how his crypto exchange crumbled overnight.

Why Was Bankman-Fried Arrested

A report by Coindesk, an information platform for the emerging crypto economy, found out that Alameda Research, a sister company also founded by Bankman-Fried, was based and built on the FTT currency. The FTT currency was a token created by FTX which had no independent value.

A report by PYMNTS in November revealed that FTX used customer funds to help out its sister-firm Alameda Research. It used around $10 billion of customer funds as Alameda suffered major losses owing to its trading strategies dating back to April 2021.

The PYMNTS report pointed out that “exchanges must back their customer funds 1:1 to ensure and insure liquidity.”

The financial relationship between FTX and Alameda has been dubbed as ‘intimate, compromising and complicated’ by cryptocurrency watchers as it was not subjected to any financial controls.

This allowed Bankman-Fried and Alameda co-CEOs Sam Trabucco and Caroline Ellison to destroy over $20 billion dollars of profits and deposits in less than seven days.

The reports say that FTX brought celebrities on board and spent heavily on advertisements, branding deals and even were planning on naming a stadium.

Meanwhile, Bankman-Fried was bringing in $420 million of fresh funding but at the same time he was cashing out almost 75% of the money - close to $300 million - by selling a part of his personal stake in FTX.

Alameda Research also made $4.1 billion in combined loans to so-called ‘related parties’.

Of that $4.1 billion, $1 billion went to SBF, $2.3 billion went to SBF-controlled Paper Bird Inc., $543 million to FTX’s head of engineering, Nishad Singh and remaining $55 million to FTX Digital Markets’ head, Ryan Salame, PYMNTS reported.

The crypto exchange is suspected of fraud for propping up Alameda with billions of dollars in customer funds which are now lost forever.

There are allegations against Bankman-Fried which claim he engaged in market manipulation, or illegally provided inside information to Alameda, news agency AFP reported.

The exchange has filed for bankruptcy and its new CEO John J Ray III told the US Congress and courts that the lack of corporate governance and the extent of documentation failures at FTX were something that he never encountered before.

“Never in my career have I seen such an utter failure of corporate controls at every level of an organisation, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever,” Ray was quoted as saying.

SBF told the BBC earlier last week that he hopes to make the money to pay back the investors who lost their wealth in FTX.

Bankman-Fried defied legal advice over the past few weeks and spoke to the New York Times, New York Magazine, Vox and numerous other news outlets.

He also spoke at Twitter Spaces and in a live Forbes interview before his arrest.

He usually joined these live events via a video link from the Bahamas where his company is headquartered.

SBF’s First Trial on Tuesday

Sam Bankman-Fried, aka SBF, often dubbed as the next Warren Buffett, will remain in custody of the Bahamas police as the US prepares an extradition request. The news of the arrest was shared by the Bahamas prime minister’s office who confirmed that he was arrested from his apartment complex in Nassau.

SBF gained fame as he made numerous donations to political parties. His image of a video game loving, baggy-shorts-wearing and loves-to-sleep-on-a-bean-bag CEO, and his philanthropic nature gave an impression that he is among those who will be instrumental in shaping the future of money.

He believed FTX would ‘give back’ and said he wanted to indulge in ‘effective altruism.’

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the southern district of New York,” Damian Williams, lead prosecutor for the district, said in a tweet.

Later, local law enforcement authorities also confirmed his arrest.

The cyber whiz kid who was the symbol of a new-age investor made cryptocurrency look like an above-board investment and no longer a frowned on get-rich-quick scheme.

The implosion came after it reached a total valuation of $32 billion.

Experts say that Bankman-Fried and Alameda co-CEO Caroline Ellison both worked at top trading firms before they founded FTX but that did not make them expert traders or expert business administrators.

The report from PYMNTS says that it was not the trading but the pressures of running a major business that brought the exchange down.

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first published:December 13, 2022, 09:19 IST
last updated:December 13, 2022, 10:19 IST
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