Explainer
Sam Bankman-Fried has been arrested. What happens
next to the FTX founder?
The former CEO has been arrested in the Bahamas, a day
before he was due to appear at a House committee hearing on the collapse of the
cryptocurrency exchange
Former FTX CEO Sam Bankman-Fried has been arrested in
the Bahamas on charges that are expected to be unsealed in the US on Tuesday.
Josh Taylor
@joshgnosis
Tue 13 Dec
2022 05.38 GMT
FTX founder
Sam Bankman-Fried has been arrested in the Bahamas following the bankruptcy of
the cryptocurrency exchange, which left over a million investors owed billions
of dollars. So what happens next?
Why was Bankman-Fried arrested and what was he charged
with?
The
Southern District of New York (SDNY) said on Monday night that he was arrested
based on a sealed indictment filed by the SDNY. “We expect to move to unseal
the indictment in the morning and will have more to say at that time,” it
added.
The
Securities Exchange Commission (SEC) subsequently said it had “authorized
separate charges relating to [Bankman-Fried’s alleged] violation of securities
laws, to be filed publicly tomorrow [Tuesday] in SDNY.”
That will
give us an insight into what Bankman-Fried will be facing if and when he is
extradited to the United States.
According
to reports, Bankman-Fried complied with police during the arrest.
When will he be extradited to the United States?
It remains
unclear at this point. The United States has an extradition treaty with the
Bahamas that will allow the US to seek extradition but there are likely a few
legal hurdles to overcome before that happens. The New York Times reported it
could take weeks or longer if Bankman-Fried decides to contest the extradition.
So far,
Bankman-Fried has cooperated with authorities
What does this mean for his next public appearances?
Bankman-Fried
is due to face court on Tuesday morning in the Bahamas, after spending the
night in a police cell. Whether he is granted bail pending the extradition will
be one of those questions likely answered at the hearing.
He had been
due to speak on Tuesday before US lawmakers, “calling in” from the Bahamas to a
hearing before the House financial services committee.
In a
statement, Congresswoman Maxine Waters who chairs the committee said she was
disappointed Bankman-Fried would no longer be appearing at the hearing.
“Although
Mr Bankman-Fried must be held accountable, the American public deserves to hear
directly from Mr Bankman-Fried about the actions that’ve harmed over one
million people, and wiped out the hard-earned life savings of so many,” she
said. “The public has been waiting eagerly to get these answers under oath
before Congress, and the timing of this arrest denies the public this
opportunity.”
One of the
most confusing parts of the saga is that Bankman-Fried has spoken to the media
and made other public appearances to talk about what has happened to FTX, in a
move that would appear to go against the advice most lawyers would give to
their clients.
It is one
of the questions that would have no doubt been raised by US lawmakers in the
hearing on Tuesday.
However,
FTX’s new CEO, John Ray III, is scheduled to appear. He referred to FTX as an
“unprecedented and complete failure of corporate controls” the likes of which
he has not witnessed in his 40-year career.
What will the arrest mean for investors?
The
bankruptcy process underway with FTX and its associated companies will continue
in parallel as the legal case against Bankman-Fried progresses. Individual
customers are said to be owed up to $1m by FTX.
In his many
public appearances since FTX’s collapse, Bankman-Fried has talked about making
customers whole and finding ways to repay them for their investment losses.
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