Sam Bankman-Fried testifies before the House Financial Services Committee on Dec. 8, 2021. (Screenshot via the Committee)
The day before his anticipated congressional testimony about the precipitous collapse of his multi-billion dollar cryptocurrency exchange, FTX founder Sam Bankman-Fried has been arrested in the Bahamas at the request of U.S. authorities, who charged him in a federal indictment in New York.
Early on Tuesday morning, the Securities and Exchange Commission accused Bankman-Fried of raising more than $1.8 billion from FTX investors, while allegedly diverting his customers’ money to Alameda Research LLC, his privately-held crypto hedge fund.
“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,” SEC Chair Gary Gensler said in a statement.
Despite billing himself as a disheveled “visionary,” the SEC claims: “The reality was very different.”
“From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried continually diverted FTX customer funds to Alameda and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases,” the 28-page complaint alleges.
Manhattan U.S. Attorney Damian Williams confirmed the arrest in a brief statement, promising the unsealing of his indictment and further remarks on Tuesday morning Eastern Time.
Bahamanian officials issued more fulsome remarks late on Monday, noting that they received notice of a likely request to extradite Bankman-Fried.
Once such a request is made, the attorney general said, authorities there plan to process it “promptly” and in accordance with Bahamanian law and its treaty obligations with the United States.
“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law,” Bahamanian Prime Minister Philip Davis wrote in a statement, later referring to Bankman-Fried by his now-well known initials. “While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigation into the collapse of FTX, with the continued cooperation with law enforcement and its regulatory partners in the United States and elsewhere.”
A prominent Democratic donor, Bankman-Fried became a billionaire through his cryptocurrency exchange marketed to a mass audience. FTX famously advertised during the Super Bowl, with a guest appearance by Curb Your Enthusiasm’s Larry David. The comedian, who has now been sued for his appearance, played the foil in ad titled “Don’t Miss Out on Crypto,” as an example of the skeptic who gave a pass to a lucrative investment opportunity.
Several other celebrities and athletes who lined up to lend their names to the FTX brand — including quarterback Tom Brady, model Gisele Bündchen, basketball legend Shaquille O’Neal and others — are now David’s co-defendants in a federal lawsuit.
Beyond trying to mainstream cryptocurrency on the TV airwaves, Bankman-Fried also aggressively courted Capitol Hill, often with strategic donations to overwhelmingly (but not exclusively) Democratic politicians. He made that pitch more palatable by expressing openness to federal authorities regulating his industry and testified previously before the House Financial Services Committee and the U.S. Senate Committee on Agriculture, Nutrition and Forestry.
Becoming a fixture known by his initials, SBF had been slated to appear again on Tuesday for a House Financial Services Committee hearing titled “Investigating the Collapse FTX, Part 1.”
The committee’s Chairwoman Maxine Waters (D-Calif.) said she was “surprised” by Bankman-Fried’s arrest — but added that it was “about time” to launch the process to bring him to justice.
“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,” Waters said in a statement. “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. While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened, and the Committee looks forward to beginning our investigation by hearing from Mr. John Ray III tomorrow.”
An attorney specializing in recovering money from failed corporations, Ray previously served as CEO of Enron to oversee its liquidation. He has taken over as CEO’s FTX and will testify before the committee about his new role in the company on Tuesday.
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