FTX founder Sam Bankman-Fried was arrested by Bahamian authorities this evening after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government.
the Bahamian government of allegedly working with Bankman-Fried to spirit away FTX assets from company control and into into crypto wallets controlled by Bahamian regulators.
Bankman-Fried's arrest by Bahamas law enforcement, as well as his expected extradition, suggest that close cooperation between the Bahamas and the U.S. will continue to evolve throughout the bankruptcy proceedings. The Bahamas and the United States have had an extradition treaty in place since the early 20th century, when the Bahamas was still under British control.
In November, FTX and its affiliates filed for bankruptcy and Bankman-Fried stepped down from his role as CEO. The crypto trading firm imploded in spectacular fashion following arevealed a 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 rival exchange, announced it would sell its stake in FTT, spurring a massive withdrawal in funds.
Bankman-Fried was replaced by John J. Ray III, who had overseen Enron's bankruptcy. Ray is also scheduled to testify before Congress this week. In prepared remarks, Ray said that FTX went on a"spending binge" from late 2021 through 2022, when approximately"$5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them," and that the firm made more than $1 billion in"loans and other payments...
Ray also confirmed media reports that FTX customer funds were commingled with assets from Alameda Research. Alameda used client funds to do margin trading, which exposed them to massive losses, Ray said.that if the federal government pursues wire or bank fraud charges that Bankman-Fried could face life in prison without the possibility of supervised release. Such a severe punishment would be unusual but not extraordinary.
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