By Ambar Warrick
Investing.com-- Sam Bankman-Fried, the former head of bankrupt cryptocurrency exchange FTX, was arrested by Bahamian authorities on Monday evening at the request of the U.S. Government, a U.S. attorney confirmed.
Bankman-Fried was arrested based on a sealed indictment filed by the Southern District Court of New York, the court said in a statement citing U.S. attorney Damian Williams. The indictment will likely be unsealed on Tuesday morning, Williams said.
Separately, the Office of the Attorney General of the Bahamas said that Bankman-Fried faces potential extradition to the U.S.
The former FTX CEO’s arrest comes just ahead of a Congressional hearing on Tuesday, where Bankman-Fried was expected to testify remotely. He had also reportedly refused to testify at a Senate Banking Committee hearing on Wednesday over the FTX collapse.
FTX, once the second-largest crypto exchange in the world, filed for bankruptcy in November after reports that it had misappropriated customer funds triggered a slew of withdrawals which it could not honor.
FTX had allegedly spent and traded customer funds through Bankman-Fried’s trading firm Alameda Research.
In a series of interviews after the bankruptcy, Bankman-Fried had attempted to downplay accusations of fraud, instead attributing the alleged misappropriation of customer funds to poor capital controls and accounting errors. He had resigned as FTX’s CEO on the same day as the bankruptcy filing.
The exchange and its U.S. subsidiary had both suspended withdrawals in November, with no indication of when customers will be able to withdraw their funds. Reports suggest that at least $1 billion worth of customer funds are unaccounted for.
The exchange’s bankruptcy sent ripples through the crypto market, coming as a major blow to the space after a sustained decline in prices this year. It also triggered bankruptcies in several companies that were exposed to FTX, including lenders BlockFi and Voyager Digital.
The crypto market has lost over two-thirds of its market capitalization in the past year, as rising interest rates and growing scrutiny of the space triggered a sharp drop in token prices.
Bitcoin, the world’s largest cryptocurrency, is trading down over 75% from a record high hit in November 2021.