By: Staff Writer
December 13, 2022
Sam Bankman-Fried (SBF), former Chief Executive Officer of the collapsed crypto-exchange, FTX, has been arrested by Bahamian authorities and now faces extradition and additional charges in the US from the Securities Exchange Commission (SEC).
The Attorney General’s Office of The Bahamas, in a media release on SBF’s arrest, said that they are announcing the arrest by The Royal Bahamas Police Force of Sam Bankman-Fried (“SBF”), former CEO of FTX. SBF’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition.”
The statement continues, “As a result of the notification received and the material provided therewith, it was deemed appropriate for the Attorney General to seek SBF’s arrest and hold him in custody pursuant to our nation’s Extradition Act.
“At such time as a formal request for extradition is made, The Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States.”
SBF’s arrest came a day before a US Congressional hearing on the collapse of FTX with the company’s new CEO, John Ray. The company’s collapse sent shockwaves through the cryptocurrency world for the size of its failure and how many people were connected to its failure. Names such as NBA superstar, Steph Curry, NFL icon, Tom Brady and his ex-wife, Gisele Bündchen, both had invested millions in the crypto-exchange, with the former speaking at SBF’s last crypto-conference in April of this year in The Bahamas.
Losses at FTX and its parent company Alameda are still being assessed, but some estimates have the customer losses as high as $8bn and as low as $1.5bn. Over 1m people have yet been made whole from the company’s losses.
Damian Williams, the US Attorney General for the Southern District of New York, said at a press conference yesterday that they are working with Bahamian authorities in order to facilitate the transfer of SBF.
The SEC in the US put out a statement on their investigations and has charged SBF with, “orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX), the crypto trading platform of which he was the CEO and co-founder.”
The statement also said: “According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors. In his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX’s sophisticated, automated risk measures to protect customer assets.”
PArt of FTX’s troubles was with regard to its undisclosed risks it accumulated on its books, which led to their digital assets losing value in the matter of weeks when the asset classes they were tied too had precipitously declined.
“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,” said SEC Chair Gary Gensler. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws. Compliance protects both those who invest on and those who invest in crypto platforms with time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business. It also shines a light into trading platform conduct for both investors through disclosure and regulators through examination authority. To those platforms that don’t comply with our securities laws, the SEC’s Enforcement Division is ready to take action.”
“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike. While we continue to investigate FTX and other entities and individuals for potential violations of the federal securities laws, as alleged in our complaint, today we are holding Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from investors in FTX and misusing funds belonging to FTX’s trading customers.”
The Securities Commission of The Bahamas has also chimed in on comments made by FTX’s new CEO, John J Ray on The Bahamas’s slack regulatory oversight that led to the company’s collapse. “To be clear, the Securities Commission of The Bahamas was the first regulator in the world to take strong, decisive action to protect the customers and creditors of FTX – regardless of where they may be located. Every action taken by the Securities Commission of The Bahamas was in strict accordance with our country’s legislation and with orders made by the Supreme Court of The Bahamas. These actions included securing the transfer of potentially commingled digital assets of FTX Digital Markets Ltd. and affiliates to a secure location under the authority of an Order issued by the Supreme Court of The Bahamas. The Commission holds those assets as trustee only (under Bahamian Law), and they will be ultimately distributed to creditors and clients of FTX, wherever they may be located, in accordance with the court’s direction.”
It also said: “Mr. Ray has referred to redacted email correspondence by and between Mr. Bankman-Fried and Bahamian officials. Those redactions were designed to create a false impression of communications between Mr. Bankman-Fried and the Commission. These redactions are disturbing as Mr. Ray is aware that the full email reveals Mr. Bankman-Fried’s acknowledgement that he had “not briefed the Securities Commission.” The Commission has previously addressed improper distributions to Bahamian citizens in its statement dated 12 November 2022. The Commission reaffirms its prior statement and notes that to the extent improper distributions were made to Bahamian citizens, such distributions will be subject to the appropriate claw back actions under the law.”
Mr Ray testified this morning in front of The United States House Committee on Financial Services, where he did not double down on these claims.
SBF now in Bahamian custody awaits the US extradition request any day now. He has waived his right to extradition and vowed to fight it to the bitter end.