Politics

Sam Bankman-Fried busted on the night of the Congressional grilling

Erika P. Rodriguez/Chicago Tribune via Getty

Erika P. Rodriguez/Chicago Tribune via Getty

Sam Bankman-Friedthe fallen crypto king who spearheaded the fiery $32 billion implosion of FTX last month was arrested by Bahamian authorities on Monday after being indicted in the US

The 30-year-old Stanford graduate was taken into custody on the eve of his scheduled testimony before Congress-and a few hours later he said he was more afraid of photographers than being arrested.

A Twitter account for the US Attorney for the Southern District of New York confirmed the wunderkind’s arrest, saying it was “based on a sealed indictment filed by the SDNY.”

“We expect to move to quash the indictment tomorrow and will have more to say at that time,” the tweet continued.

The US Securities and Exchange Commission followed soon after, praising law enforcement partners “for securing the arrest of Sam Bankman-Fried on federal criminal charges,” a tweet said.

It confirmed that the SEC has approved separate charges relating to Bankman-Fried’s alleged “securities law violations.”

The Attorney General of the Bahamas – where Bankman-Fried and his cabal were now bankrupt cryptocurrency exchange FTX– said it expected the US to seek his extradition.

A spokesman for Bankman-Fried did not immediately respond to a request for comment.

Bankman-Fried was scheduled to testify Tuesday before the House Committee on Financial Services, which would have marked his first time speaking under oath since the firm’s collapse.

He would likely have faced questions about alleged financial shenanigans that took place at FTX, including whether the company improperly moved client funds to bail out his crypto trading firm, Alameda Research.

In a draft of his testimony to Congress seen by Reuters On Monday, Bankman-Fried said he was pressured to name a new CEO of FTX — John J. Ray III — in early November by lawyers who were advising the company at the time.

After he agreed to nominate Ray, Bankman-Fried received a “potential billion-dollar financing offer to help make clients whole,” he wrote. But then it was too late.

Ray is the only other named witness besides Bankman-Fried who was expected to testify before the House committee this week.

Rep. Maxine Waters (D-CA), the chairwoman of the House Committee on Financial Services, said in a Monday statement that she was “surprised” to learn of the arrest, the timing of which she added “denies the public” an opportunity for answers.

“It is time that the process to bring Mr. Bankman-Fried to justice began,” she said. “… Although Mr. Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr. Bankman-Fried about the actions that have harmed over a million people and wiped out the hard-earned life savings of so many.”

Waters concluded by saying her office was “disappointed” the House would not hear Bankman-Fried’s testimony, it remained engaged in the investigation. She confirmed that Ray would testify on Tuesday.

During an interview on Twitter Spaces on Monday, Bankman-Fried said he intended to appear before the House via Zoom from the Bahamas, but claimed he did not come to the US only because of the “paparazzi”.

“I don’t think I’m going to get arrested,” he said.

The disgraced ex-billionaire – who claims he now has just one bank account with about $100,000 in it – has professed ignorance of the details of Alameda’s operations, suggesting he will try to blame other executives for the debacle.

Experts in the past told The Daily Beast that such an apology cannot absolve Bankman-Fried of guilt.

“It’s like you came to me as a professor and said, ‘Hey, God, why did you let all this cheating happen in your class?’ And I’m like, ‘Listen, I was just focused on teaching the students,'” said Joseph Wall, the Donald F. Flynn and Beverly L. Flynn Chair of Accounting Ethics and Disruptive Technologies at Marquette University. “Both things can be true, but it does not absolve me of my responsibility to catch the cheater and give a proper grade.”

Since last month’s collapse, FTX and its executives have also come under intense scrutiny over an apparently lax approach to corporate oversight.

“Never in my career have I seen such a complete failure of corporate control and such a complete absence of reliable financial information as occurred here,” the company’s new CEO, John J. Ray III, wrote in a Nov. 17 bankruptcy filing.

Read more at The Daily Beast.

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