CRYPTOCURRENCY
FTX founder Sam Bankman-Fried arrested in Bahamas: What is he accused of and what’s next for him?
The chickens are coming home to roost as the authorities finally catch up with the man once dubbed the ‘King of Crypto’ potentially facing years behind bars.
Sam Bankman-Fried, founder and former CEO of the collapsed cryptocurrency exchange FTX has been arrested in the Bahamas for his role in what prosecutors are describing as one of the largest fraud cases in American history.
Back in November, FTX, once the second-largest cryptocurrency trading hub on the internet, was plunged into bankruptcy during a liquidity crisis. The collapse revealed a large number of irregularities in the financial governance of FTX with customers investments being sent to other companies to invest as well as billions of dollars missing from accounts.
Bankman-Fried has been keen to argue this was due to inexperience. Others have posited it represents fraud, and the US government agrees.
The FTX founder was no stranger to the limelight between the FTX collapse and his arrest
During his time as a near-fugitive, Bankman-Fried has inexplicably taken part in a large number of interviews with news outlets and YouTuber . In one with YouTuber CoffeeZilla, Bankman-Fried may have accidentally conceded that he had broken the terms of service of his own website by having customer investments
“At the time, we wanted to treat customers equally,” Bankman-Fried said during a Twitter Spaces event, “That effectively meant that there was, you know, if you want to put it this way, like fungibility created” between the exchange’s customer accounts.
What this means is there may actually have been one large wallet in which customers who thought they were investing into low-risk accounts were actually sharing space with those who were risking big. When FTX came crashing down the “safer” investors were just as likely to lose all their money as someone gambling big.
Just moments Bankman-Fried had said that he, “did think we‘re treating them differently,” in terms of customer differentiation while in a seperate BBC interview he denied that customer money was used for financial bets.
Whether this is incriminating information or not may not really matter; the head of a company that had crashed, throwing billions of dollars down the drain, in potentially fraudulent circumstances doing rounds of public interviews will undoubtedly be a prosecutor’s dream.
What happens now?
So we come to Tuesday’s arrest. Despite looking likely to appear before a congressional committee to explain FTX’s downfall, Bankman-Fried has been charged by the US Securities and Exchange Commission (SEC) for eight total counts. The long and short of it is major fraud allegations.
“All of this dirty money was used in service of Bankman-Fried’s desire to buy bipartisan influence and impact the direction of public policy in Washington,” the US attorney leading the investigation, Damian Williams said.
The charges allege that Bankman-Fried defrauded investors out of $1.8 billion. Williams added the scandal is “one of the biggest financial frauds in American history”.