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.