The founder and former CEO of the bankrupt crypto exchange FTX Sam Bankman-Fried has been arrested in the Bahamas, after the prosecutor of the Southern District of New York shared the indictment against him with the local authorities.
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Bankman-Fried’s arrest is the first concrete move by U.S. regulators against the leaders of the FTX crypto exchange, after last month’s stock market collapse caused billions of dollars in losses for investors. Authorities in the Bahamas are expected to extradite Bankman-Fried to the United States.
About a month ago, the FTX exchange filed for bankruptcy and went from a valuation of 32 billion dollars to bankruptcy within a few days.
Bankman-Fried – a young man of only 30 years old – was seen before the bankruptcy filing as a kind of savior of the crypto industry. He wanted to position himself as the responsible adult, the road map to a good and strong industry. He made sure to be involved in the regulation, give comments, express his opinion, attend the hearings that were held on the future of the industry, and scattered a bunch of altruistic statements.
At the beginning of 2022, Bankman-Fried’s fortune was estimated at more than 24 billion dollars, and he was ranked 60th on Forbes magazine’s list of billionaires.
The upheaval in FTX began with the publication in CoinDesk, a magazine of the crypto industry, of the balance sheet of its sister company Alameda.
According to the same publication, the balance is largely composed of the currency issued by FTX, money that does not represent real value. All this while real money was invested in the failing stock market – and a lot of it. The company carried out several fundraising rounds: it raised $900 million in mid-2021 at a value of $18 billion, and in early 2022 it raised another $400 million at an imaginary value of $32 billion. In all this, a lot of money was invested in leverage and financial exercises, under the cover of poor accounting records, instead of real innovation.
When it was already clear that the company was in trouble, it held talks to sell it to the Binance crypto exchange, and the parties even announced the closing of the deal. It didn’t even last 24 hours.