Former FTX CEO Sam Bankman-Fried arrested in Bahamas, charged with wire fraud and conspiracy in U.S.

Former FTX CEO Sam Bankman-Fried was arrested Monday in the Bahamas, based on charges filed in the U.S. The federal charges, unsealed Tuesday morning, include multiple counts of wire fraud and conspiracy related to the collapse of his cryptocurrency exchange.

Bankman-Fried’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 Office of the Attorney General of the Bahamas said in a statement Monday.

The U.S. Attorney’s Office for the Southern District of New York confirmed Bankman-Fried was in custody, saying that the arrest was made based on a sealed indictment. “We expect to move to unseal the indictment in the morning and will have more to say at that time,” the SDNY said.

The grand jury indictment charged Bankman-Fried — widely known by his initials, SBF — with seven counts, including wire fraud and conspiracy to commit wire fraud against lenders and customers, conspiracy to commit securities fraud, conspiracy to commit money laundering, and violations of campaign finance laws.

Federal regulators and the Justice Department had been investigating whether FTX used customer funds to back risky bets at Bankman-Fried’s hedge fund, Alameda Research.

The Securities and Exchange Commission said following news of the arrest that it had “authorized separate charges relating to [Bankman-Fried’s] violations of securities laws.” The SEC complaint alleges that Bankman-Fried diverted diverted customer funds from FTX to Alameda Research and used that money for “fraudulent” purposes, including real estate purchases and big political donations.

FTX was one of the world’s largest cryptocurrency exchanges before it collapsed last month. Users withdrew roughly $5 billion of crypto assets in a single day as concerns mounted over the exchange’s solvency. Bankman-Fried resigned on November 11 and FTX filed for Chapter 11 bankruptcy protection.

John Ray III, who took over as FTX CEO after a long career that included overseeing the Enron bankruptcy, said in court documents the following week, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

The court documents also accused Bankman-Fried and FTX of failing to accurately account for the value of FTX’s crypto assets and of disorganized management of FTX’s cash holdings.

“One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making,” Ray wrote. “Mr. Bankman-Fried often communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.”  

Bankman-Fried’s arrest comes one day before he had been expected to testify at a House hearing on the crypto exchange’s collapse. He had said last week he would be willing to testify before Congress but warned his comments would be limited and “won’t be as helpful” as he’d like to be. On Monday, just a short time before his arrest, Bankman-Fried said in a Twitter Spaces event that he would be “calling in” to the hearing, Reuters reported. 

Following his arrest, Bankman-Fried was removed from the witness list for Tuesday’s hearing. Ray is still expected to testify.

Congresswoman Maxine Waters, who chairs the House Financial Services Committee, said in a statement that she was “surprised” by the arrest.

“It’s about time the process to bring Mr. Bankman-Fried to justice has begun,” Waters said. “However, as the public knows, my staff and I have been working diligently for the past month to secure Mr. Bankman-Fried’s testimony before our Committee tomorrow morning.” 

Waters added that, while she believes Bankman-Fried should be “held accountable,” the timing of the arrest will deny people the opportunity to hear the former CEO testify under oath “about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many.”

Bankman-Fried was arrested “without incident” and is scheduled to appear in court in the Bahamas on Tuesday, the Royal Bahamas Police Force said in a statement.

Robert Legare, Pat Milton and Khristopher J. Brooks contributed reporting.