FTX founder Sam Bankman-Fried was arrested in the Bahamas at the behest of U.S. prosecutors on Monday, the day before he was due to testify before Congress about the abrupt failure last month of one of the world’s largest cryptocurrency exchanges, Reuters reported. The arrest marks a stunning fall from grace for the 30-year-old entrepreneur widely known by his initials SBF, who rode a boom in bitcoin and other digital assets to become a billionaire many times over until FTX's rapid demise. The exchange, launched in 2019 and based in the Bahamas, filed for bankruptcy Nov. 11 after it struggled to raise money to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours. Since then it emerged Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business. The arrest came as Bankman-Fried prepared to lash out at his former lawyers at Sullivan and Cromwell, new FTX CEO John Ray and rival exchange operator Binance at a Congressional hearing. In the testimony, a draft copy of which was seen by Reuters, Bankman-Fried planned to say he was pressured by Sullivan and Cromwell lawyers to nominate Ray as CEO following the sudden exodus of customer funds. And when within minutes he changed his mind, following an offer of billions of dollars of fresh funding, he was told it was too late. Bankman-Fried will now be unable to testify, according to Congresswoman Maxine Waters, who said in a statement she was surprised to hear of his arrest. Ray's testimony will go ahead.
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The House Financial Services Committee’s hearing is scheduled today at 10 a.m. ET to investigate FTX’s collapse. Click here to access a live web stream of the hearing.
Additionally, the Senate Banking Committee will hold a hearing tomorrow at 10 a.m. ET titled "Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers." Witnesses currently scheduled to testify include Prof. Hilary J. Allen of the American University Washington College of Law, Kevin O’Leary, an investor, Jennifer J. Schulp Director Of Financial Regulation Studies at the Cato Institute's Center for Monetary and Financial Alternatives, Cato Institute and actor and author Ben McKenzie Schenkkan. Click here to access the live web stream for tomorrow's hearing. Read more.
U.S. regulators filed civil securities fraud charges today against Sam Bankman-Fried, the founder of the collapsed FTX crypto exchange, who was arrested last night at his home in the Bahamas, the New York Times reported. The Securities and Exchange Commission charged him with misleading big investors, who committed nearly $2 billion to FTX in recent years, about the financial health of the crypto exchange and its sister crypto trading platform, Alameda Research. The SEC also said that Mr. Bankman-Fried misled customers by taking in billions of dollars to trade crypto on FTX and telling them it was safe. But the SEC said that money from customers was commingled with funds at Alameda and used to finance investments in outside ventures, buy real estate and make political donations. “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,” the S.E.C. chair, Gary Gensler, said in a statement.
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