Sam Bankman-Fried arrested in Bahamas; what comes next?

Sam Bankman-Fried, former chief executive officer of the FTX.com cryptocurrency exchange, was arrested by the Royal Bahamas Police on Monday at the request of U.S. authorities, in another step in the saga of a US$32 billion company that imploded in bankruptcy in a matter of days last month.

The arrest was based on an indictment that will be unsealed on Tuesday, said Damian Williams, the U.S. attorney for the Southern District of New York, on Twitter. The New York Times reported the charges include wire fraud, securities fraud, and money laundering, citing a source familiar with the matter.

“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law,” Bahamian Prime Minister Philip Davis said in a statement. The U.S. will likely request his extradition, according to Bahamas Attorney General Ryan Pinder.

FTX, formerly one of the world’s largest crypto trading platforms, filed for Chapter 11 bankruptcy protection on Nov. 11, along with its brokerage arm Alameda Research and dozens of other affiliated companies.

The collapse caused billions of dollars of losses worldwide, with accusations of operational misconduct alleging FTX misappropriated client deposits for trading by Alameda Research.

See related article: FTX failure a ‘wake-up call’ for security, says former Mt Gox CEO Mark Karpeles

“This likely has been in the works for days between the law enforcement officials, and the timing shows the urgency U.S. authorities wanting Sam Bankman-Fried in custody,” Braden Perry, ​​former senior trial attorney at the Commodity Futures Trading Commission and partner at law firm Kennyhertz Perry, told Forkast.

Richard Levin, chair of fintech and regulation practice of law firm Nelson Mullins Riley & Scarborough, told Forkast that once the indictment is unsealed, “we will know exactly what he’s been charged with — if it’s securities fraud, bank fraud, wire fraud, etc.”

Perry said that Bankman-Fried was supposed to testify on Tuesday at the House Financial Services Committee hearing, and “the arrest may have been due to his refusal to testify in person and to remain overseas,” Perry said.

“There was also speculation that SBF had planned to flee the Bahamas for a non-extradition country. The arrest could be a response to those rumors as well,”Perry said.

Levin added: “If he has been arrested and he is in custody, he will not be able to give testimony before Congress. If he is out on bond, he could give testimony. However, I would believe it would be unlikely for him to do so if he has been indicted.”

Bankman-Fried, if convicted, could face decades in prison, Perry and Levin told Forkast last month. “With respect to the criminal sanctions, depending on the number of violations and the dollar value of violations, under the federal sentencing guidelines, you could be looking at potential criminal liability that could exceed 20 years of incarceration,” Levin said.

Perry said Bankman-Fried could even face “life in federal prison without the possibility of supervised release.”

See related article: Sam Bankman-Fried probed over Terra-LUNA crash: report

Cryptocurrency critic U.S. Senator Elizabeth Warren waded in on Twitter:  “I’ve long urged [The Department of Justice] to hold corporate executives personally accountable when their companies break the law,” she wrote. “Crypto executives who break the law are just like any other crooks. If Sam Bankman-Fried committed fraud, then federal prosecutors should send him to prison.”

Bankman-Fried has repeatedly denied any knowledge of improper use of customer funds.

While Bankman-Fried said last month at the New York Times DealBook Summit that criminal liability is not his biggest concern, he has hired white-collar crime specialist Mark Cohen to represent him, a Bankman-Fried spokesperson told Forkast last week.

At FTX’s first bankruptcy hearing last month, an attorney for the company said the company was run as “personal fiefdom” of Sam Bankman-Fried and that a “substantial amount of assets” has either been stolen or gone missing.