Bankman-Toast? FTX CEO arrested in Bahamas, faces US extradition

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Sam Bankman-Fried, CEO of failed digital asset exchange FTX, was arrested in the Bahamas on Monday evening on U.S. charges, according to media reports. He will face a Magistrate’s Court on Tuesday and local authorities expect to extradite him to the United States in connection to events surrounding FTX’s multibillion-dollar collapse last month.

The Royal Bahamas Police Force issued a statement saying Bankman-Fried was taken into custody at his home around 6 pm on Monday, December 12, without incident. He was “arrested in reference to various Financial Offences against laws of the United States, which are also offenses against laws of the Commonwealth of The Bahamas,” the statement said.

When or whether Bankman-Fried would be arrested and charged has been the hottest topic in the digital asset industry since the collapse of FTX. More popularly known as “SBF,” he had previously built a “white knight” image in the industry as FTX’s head by investing in various other blockchain businesses, including BlockFi and Voyager Digital, and buying naming rights to a major sports stadium in Miami. He also appeared in prominent media interviews and international forums promoting his brand of “effective altruism” and donated over $23 million to Democratic Party election campaigns.

While SBF’s indictment is still officially sealed, some media reported the charges as being wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. FTX allegedly moved around $10 billion to its partner trading firm Alameda Research, which may have included a sizeable amount of FTX customer funds. The incident has had international implications since FTX.com officially accepted only non-U.S. customers and had taken over other large trading platforms in countries like Japan. Customers have had no access to their user wallets and remain unable to withdraw funds, which may or may not still be there at all.

SBF has since made several public statements defending his actions, claiming he never knowingly comingled customer and company funds, and was unaware of any transfers. He has profusely apologized to users on Twitter and at a conference appearance last week, appearing to blame his own lack of attention for the crisis without admitting specific responsibility. However, his contrition has fallen mostly on deaf ears, with most responses calling for his arrest and incarceration.

FTX-Binance spat continued right up to Bankman-Fried’s arrest

In a long Twitter thread on December 9, Binance CEO Changpeng “CZ” Zhao made a list of accusations against FTX and SBF, saying he had used his wealth and position to influence policymakers and “manipulate public opinion” while overspending on media/conference tours, luxury real estate and parties for employees, and marketing promotion.

7/ Shortly after that Sam began “investing” in friends in high places – from media, to policymakers, to celebrities (like Kevin). And he used that network to manipulate public opinion, including attacking me and others in the industry.

— CZ 🔶 BNB (@cz_binance) December 9, 2022

CZ also alleged SBF became “unhinged” after Binance withdrew from an investment deal with FTX, making threats of revenge against Binance and his personal reputation. “We still have those text messages,” he wrote.

The two CEOs have engaged in a very public game of accusation tennis since FTX’s implosion, which itself began following a media “leak” of records showing FTX’s dire financial situation.

However, the accusations may not be enough to rescue Binance from FTX’s whirlpool, and the exchange is reportedly also under investigation by the Justice Department. Reuters described a debate between prosecutors at the department over whether to file charges against Binance soon or to delay them until they can gather more evidence. The charges apparently include unlicensed money transmission, money laundering conspiracy, and criminal sanctions violations.

There’s also speculation over whether the Justice Department intends to charge Binance at all or to negotiate some kind of settlement. Binance is one of the largest international digital asset exchanges, and some fear prosecutions (on top of FTX’s crash) would cause the entire digital asset speculative market to experience a catastrophic failure.

Given the role of price speculation in diverting attention, talent, and capital away from blockchain’s promise of new economies and technological innovation, that failure might not be a terrible thing. It would certainly damage the industry’s image in mainstream eyes for a while and cause participants to reset their expectations. But it could also force enthusiasts to focus back on the technology that got them interested in the first place and work on building systems that create real—not just speculative—value.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.