Sam Bankman-Fried, FTX’s founder, is arrested in the Bahamas

New York

Sam Bankman-Fried, the founder of failed crypto exchange FTX, was arrested in the Bahamas on Monday after U.S. prosecutors filed criminal charges against him, according to a Bahamian government statement.

The Southern District of New York, which is investigating Bankman Fried and the collapse of FTX and its sister trading company Alameda, confirmed his arrest on Twitter.

“Earlier tonight, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. government, based on a sealed indictment filed by SDNY,” wrote U.S. Attorney Damian Williams. “We expect to unseal the indictment in the morning and we will have more to say then.”

A representative of Bankman-Fried’s legal team did not immediately respond to CNN’s request for comment.

It’s unclear what charges await Bankman-Friedthe 30-year-old crypto celeb who became an overnight pariah last month as his business suffered a liquidity crunch and filed for bankruptcyleaving at least one million depositors unable to access their funds.

Bankman-Fried has since sought to portray itself as a somewhat unhappy general manager who came out on his skis, while denying accusations that he defrauded FTX customers.

“I did not knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I was certainly not as competent as I thought.

Bankman-Fried was scheduled to appear virtually Tuesday before the U.S. House Financial Services Committee, which is demanding answers about how the company collapsed, ricocheting off the entire digital asset ecosystem. Several crypto companies have halted operations, freezing client accounts and in some cases declaring themselves bankrupt due to their exposure to FTX.

Also set to testify on Tuesday is new FTX CEO John J. Ray III, who took over from Bankman-Fried on Nov. 11 and is responsible for guiding him through the bankruptcy filing process.

Ray has so far painted a picture of a crypto empire with virtually no corporate oversight and a shocking lack of financial and other record keeping.

“The scope of the ongoing investigation is enormous,” Ray said in prepared remarks released Monday ahead of his testimony.

Although the investigation is not complete, Ray said, the collapse of FTX appears to stem from the concentration of power “in the hands of a very small group of grossly inexperienced and unsophisticated individuals” who have virtually no implemented no corporate controls.

Ray also states that “ client assets were mixed with assets from the Alameda trading platform.” This is a key issue for investigators, as FTX and Alameda were, on paper, separate entities.

Bankman-Fried denied knowingly mixing funds and sought to distance himself from the day-to-day management of Alameda, which implemented a number of high-risk business strategies such as arbitrage and “yield farming.” i.e. investing in digital tokens that pay interest-like rewards, according to Wall Street Journal report.

He admitted to mismanaging FTX and not paying enough attention to risk.

“Look, I screwed up,” he said at the New York Times’ DealBook Summit late last month. “I was CEO of FTX…I had a responsibility.”

Bankman-Fried also acknowledged the lack of corporate controls and risk management within the companies he oversaw.

“There was no one who was primarily in charge of client position risk on FTX,” Bankman-Fried told DealBook. “And that seems quite embarrassing in retrospect.”

One of the key questions about FTX’s collapse stems from a Reuters report last month, which says Bankman-Fried built a “backdoor” into FTX’s accounting system, allowing it to modify the company’s financial records without triggering accounting red flags. The report says that Bankman-Fried used this “backdoor” to transfer $10 billion in funds from FTX clients to Alameda, the hedge fund, and is now missing at least $1 billion.

Bankman-Fried denied knowledge of any such backdoor. “I don’t even know how to code” he said cryptocurrency vlogger Tiffany Fong in an interview last month.

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