Dec 12 (Reuters) – (Editor’s be aware: This story accommodates language in paragraph 18 that some readers could discover offensive)
FTX founder Sam Bankman-Fried was arrested within the Bahamas on the behest of U.S. prosecutors on Monday, the day earlier than he was as a consequence of testify earlier than Congress in regards to the abrupt failure final month of one of many world’s largest cryptocurrency exchanges.
The arrest marks a shocking fall from grace for the 30-year-old entrepreneur broadly identified by his initials SBF, who rode a growth in bitcoin and different digital belongings to develop into a billionaire many occasions over till FTX’s speedy demise.
The trade, launched in 2019 and based mostly within the Bahamas, filed for chapter Nov. 11 after it struggled to boost cash to stave off collapse as merchants rushed to withdraw $6 billion from the platform in simply 72 hours. Since then it emerged Bankman-Fried secretly used $10 billion in buyer funds to prop up his buying and selling enterprise.
The arrest got here as Bankman-Fried ready to lash out at his former legal professionals at Sullivan and Cromwell, new FTX CEO John Ray and rival trade operator Binance at a Congressional listening to.
Within the testimony, a draft copy of which was seen by Reuters, Bankman-Fried deliberate to say he was pressured by Sullivan and Cromwell legal professionals to appoint Ray as CEO following the sudden exodus of buyer funds. And when inside minutes he modified his thoughts, following a suggestion of billions of {dollars} of recent funding, he was instructed it was too late.
Bankman-Fried will now be unable to testify, in keeping with Congresswoman Maxine Waters, who stated in a press release she was stunned to listen to of his arrest. Ray’s testimony will go forward.
Bankman-Fried was arrested shortly after 6:00 pm Monday (2300 GMT) at his house advanced, a luxurious gated group known as the Albany, and can seem in a Justice of the Peace courtroom on Tuesday, Bahamian police stated. The Bahamas lawyer normal’s workplace stated it expects he will likely be extradited to america.
A spokesman for the U.S. Legal professional’s workplace in Manhattan confirmed Bankman-Fried had been arrested within the Bahamas however declined to touch upon the fees.
U.S. prosecutors stated they’d a sealed indictment towards Bankman-Fried and costs could be revealed on Tuesday. The New York Instances reported he faces fraud and cash laundering costs. The U.S. Securities and Alternate Fee individually licensed costs referring to Bankman-Fried’s violations of securities legal guidelines, the regulator stated on Monday.
Bankman-Fried and his lawyer Mark Cohen didn’t instantly reply to requests for remark, nor did Sullivan and Cromwell, FTX, Ray and Binance.
Bankman-Fried has stated he does not suppose he has any legal legal responsibility. “I did not ever attempt to commit fraud,” Bankman-Fried stated in a Nov. 30 interview on the New York Instances’ Dealbook Summit.
CRYPTO INDUSTRY REELING
FTX’s demise despatched shockwaves by way of an already-battered cryptocurrency business, which has seen a string of meltdowns this yr which have taken down different key gamers together with Voyager Digital and Celsius Community.
Extra hassle is likely to be on the horizon for the business. Reuters reported Monday that some Justice Division prosecutors imagine they’ve gathered ample proof of their long-running investigation of Binance to cost the world’s largest cryptocurrency trade and a few prime executives.
A Binance spokesperson instructed Reuters for the article: “We have no perception into the inside workings of the U.S. Justice Division, nor wouldn’t it be applicable for us to remark if we did.”
Bitcoin was regular at $17,150. It’s down greater than 60% this yr.
MEA CULPA
Because the collapse of FTX, Bankman-Fried has given quite a few media interviews apologizing for his errors and explaining what occurred on the firm, one thing that authorized consultants stated might permit prosecutors to level to inconsistencies to undermine his credibility with a jury.
“The protection goes to be fully boxed in by the prior statements SBF has made and the very incisive questions he has answered within the press and on social media,” stated legal protection lawyer and former federal prosecutor Renato Mariotti.
In his written testimony, Bankman-Fried repeated his mea culpa: “I want to begin by formally stating, below oath: I fucked up,” he wrote.
Then, he launched into an evidence of how issues went badly at FTX and his hedge fund Alameda Analysis, whereas criticizing Sullivan and Cromwell and Ray in addition to arch rival Binance for his or her actions as his agency imploded.
UNDER PRESSURE
Describing his resolution to surrender his position as CEO of FTX and appoint Ray, Bankman-Fried stated he was pressured to take action by Sullivan and Cromwell and the overall counsel of FTX’s U.S. unit, who he stated was a former lawyer on the regulation agency.
Bankman-Fried stated lower than 10 minutes after he had signed a doc at 4.30 am on Nov. 10 to make Ray the CEO of FTX, he acquired “a possible funding supply for billions of {dollars}.” Bankman-Fried stated he instructed his counsel to rescind the CEO appointment a couple of minutes later however was instructed it was already too late to take action.
Bankman-Fried stated he had since been minimize off from FTX’s programs and Ray had not responded to his emails providing assist or different info.
Bankman-Fried, who had develop into a distinguished and unconventional determine identified for his wild hair, t-shirts and shorts throughout crypto’s growth, stated the fortunes of FTX and his buying and selling agency Alameda declined quickly this yr as crypto currencies crashed amid rising rates of interest.
In late 2021, he stated Alameda had web asset worth of greater than $50 billion and manageable ranges of debt. That grew to become unsustainable as digital belongings declined.
“Final yr, my web price was valued at $20b,” Bankman-Fried wrote. “Final I noticed, I imagine my checking account had about $100k in it.”
Reporting by Jasper Ward in Washington, Luc Cohen and Jack Queen in New York, Brian Ellsworth in Miami and Angus Berwick in London; Enhancing by Megan Davies, Paritosh Bansal and Lincoln Feast
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