The founder of cryptocurrency exchange FTX, Sam Bankman-Fried, was arrested in the Bahamas on Monday following an indictment from the United States Attorney for the Southern District of New York.
The indictment is expected to charge Bankman-Fried with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. This is the first concrete action taken by regulators in relation to the collapse of FTX last month. In all, the defamed crypto founder could face up to 115 years in prison if convicted of all the current charges against him…
Additionally, the Securities and Exchange Commission (SEC) filed a complaint against ex-FTX CEO Bankman-Fried on Tuesday, alleging that he engaged in a “scheme to defraud equity investors” in FTX. The filing stated that Bankman-Fried raised more than $1.8 billion from investors without disclosing that he was using the funds to enrich himself and grow his crypto empire.
Bahamas Attorney General Ryan Pinder said that the United States is “likely to request his extradition,” and the Royal Bahamas Police Force confirmed that he has been arrested and will appear in court in Nassau.
In November, FTX and its affiliates filed for bankruptcy and Bankman-Fried resigned as CEO. The crypto trading firm collapsed following a run on assets similar to a bank run.
FTX's collapse was sparked by reports on the company's highly concentrated position in self-issued FTT coins, which Bankman-Fried's hedge fund Alameda Research used as collateral for billions in crypto loans.
Binance, a competing exchange, announced its intention to sell its stake in FTT, leading to a large withdrawal of funds. FTX then froze assets and declared bankruptcy.
Subsequent reports suggested that FTX had mixed customer funds with Bankman-Fried's crypto hedge fund, Alameda Research, resulting in the loss of billions in customer deposits.
If the federal government charges Bankman-Fried with wire or bank fraud, legal experts believe he could face a life sentence without the possibility of supervised release. This punishment would be unusual but not unprecedented; Ponzi scheme mastermind Bernie Madoff was sentenced to 150 years in prison.
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