“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the United States Attorney’s Office for the Southern District of New York,” United States prosecutor Damian Williams said in a statement. “We expect to move to unseal the indictment in the morning and will have more to say at that time.”
Mark Cohen, a lawyer for Bankman-Fried, did not immediately respond to a request for comment.
Bankman-Fried’s indictment by US authorities comes as the Department of Justice is considering charges against a far bigger player in the crypto world, industry-leading exchange Binance.
Reuters reported Monday that some Justice Department prosecutors believe they have gathered sufficient evidence in their long-running investigation of Binance to charge the company and some top executives. A Binance spokesperson told Reuters in relation to the story: “We don’t have any insight into the inner workings of the US Justice Department, nor would it be appropriate for us to comment if we did.”
Binance is under investigation for possible money-laundering and sanctions violations, Reuters has reported. Others in the department have argued for taking time to review more evidence, four people familiar with the matter told Reuters.
The arrest also came a day ahead of Bankman-Fried’s scheduled appearance before US lawmakers on Tuesday, where he was planning to give testimony via a video link.
The US House Financial Services Committee was scheduled to hear from Bankman-Fried and current FTX CEO John Ray during the first in a series of hearings to examine the collapse of FTX beginning at 10am ET.
FTX’s liquidity crunch came after Bankman-Fried secretly moved $US10 billion of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter. At least $US1 billion in customer funds had vanished, the people said.
Bankman-Fried told Reuters the company did not “secretly transfer” but rather misread its “confusing internal labelling.” Asked about the missing funds, he responded: “???”
In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged risk management failures but sought to distance himself from accusations of fraud, saying he never knowingly commingled customer funds on FTX with funds at Alameda.
“I didn’t ever try to commit fraud,” Bankman-Fried said in a November 30 interview at the New York Times′ Dealbook Summit, adding he doesn’t personally think he has any criminal liability.
Bankman-Fried resigned as FTX’s chief executive officer the same day as the bankruptcy filing.
The US Attorney’s Office in Manhattan, led by veteran securities fraud prosecutor Williams, in mid-November began investigating how FTX handled customer funds, a source with knowledge of the probe told Reuters.
The Securities and Exchange Commission and Commodity Futures Trading Commission also opened probes.
US crypto investors also sued Bankman-Fried, alleging he and a slew of celebrities who promoted FTX engaged in deceptive practices, leaving the investors with $US11 billion in damages.
FTX’s demise marked the latest turmoil for the cryptocurrency industry this year. The overall crypto market has slumped amid a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network.
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