About a month after the FTX scandal, SBF arrested in the Bahamas. Welcome to our article on the details of the arrest, the reason for it, and what awaits us in the future.
Sam Bankman-Fried, the founder of FTX, was arrested in the Bahamas on Monday at the request of American authorities, the day before he was scheduled to testify before Congress over the abrupt closure of one of the biggest cryptocurrency exchanges in the world last month.
The 30-year-old entrepreneur, commonly known by his initials SBF, rode a surge in bitcoin and other digital assets to become a multi-billionaire before FTX’s sudden end. His arrest is a remarkable fall from grace.
SBF arrested in the Bahamas
The Bahamas-based, 2019-launched exchange company filed for bankruptcy on November 11 after struggling to acquire capital to avoid collapsing as traders rushed to remove $6 billion from the platform in only 72 hours. Since then, it has come to light that Bankman-Fried hid the usage of $10 billion in customer funds for the support of his trading company.
The arrest happened just as Bankman-Fried was getting ready to confront his former attorneys at Sullivan and Cromwell, the new CEO of FTX, John Ray, and rival exchange operator Binance in front of Congress.
SBF was arrested at his apartment building, a posh gated enclave called the Albany, shortly after 6:00 pm on Monday. He will appear in court on Tuesday, according to Bahamian police. He is anticipated to be extradited to the United States, according to the Bahamas attorney general’s office. You may see the statement of Ryan Pinder KC from Twitter user @greg_price11:
🚨BREAKING: Sam Bankman-Fried has been arrested by Bahamian police following a “receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition.” pic.twitter.com/xSSDWCwGwh
— Greg Price (@greg_price11) December 12, 2022
While acknowledging that SBF was arrested in the Bahamas, a spokeswoman for the Manhattan office of the U.S. Attorney declined to comment on the accusations.
How did FTX collapse?
The collapse of FTX happened over a 10-day span in November 2022. The issue was sparked by a CoinDesk report from November 2 that showed Alameda Research, the quant trading company also run by Bankman-Fried, with a $5 billion position in FTT, the FTX native token. According to the study, Alameda had its investment base in FTT, the token that its sister business had created, rather than in fiat money or any type of cryptocurrency. That raised questions about Bankman-enterprises’ Fried’s unreported leverage and solvency throughout the cryptocurrency sector.
FTX collapse: November 6
The largest cryptocurrency exchange in the world, Binance, said on November 6 that it would sell all of its holdings of FTT tokens, or around 23 million tokens worth $529 million. Following the collapse of the Terra (LUNA) cryptocurrency token earlier in 2022, Binance CEO Changpeng “CZ” Zhao claimed that risk management was the basis for the decision to liquidate the exchange’s FTT stake.
FTX collapse: November 7
The following day, FTX was going through a liquidity crisis. Bankman-Fried made an effort to reassure FTX investors that their assets were secure, but in the days following the CoinDesk revelation, consumers demanded withdrawals totaling $6 billion. FTT’s value decreased by 80% in just two days.
FTX collapse: November 9
The promise of rescue was only temporary, as Binance withdrew from the agreement the following day. The exchange said on Nov. 9 that it would abandon the FTX acquisition after corporate due diligence revealed concerns regarding, among other things, the improper handling of customer assets.
On Twitter, Bankman-Fried acknowledged the liquidity situation and apologized for FTX’s non-U.S. exchange’s inability to meet consumer demand. According to Bankman-Fried, FTX calculated leverage and liquidity incorrectly as a result of “bad internal labeling.”
FTX collapse: November 11
On November 11, Bankman-Fried resigned as CEO of FTX and was succeeded by John J. Ray III, who had previously guided the energy trading company Enron through bankruptcy procedures. The same day, FTX revealed that around 130 other associated firms were also involved in the proceedings when it filed for Chapter 11 bankruptcy protection.
Within hours after declaring bankruptcy, FTX claimed it had been the victim of “unauthorized transactions” and that, for security reasons, it would shift its digital assets to cold storage.
FTX collapse: November 16
Sam Bankman-Fried is accused in a class-action lawsuit filed on November 16 in a federal court in Florida of developing a fraudulent cryptocurrency scheme intended to take advantage of uneducated investors from all over the nation. Other famous people who allegedly assisted Bankman-Fried in carrying out the scheme are listed in the case, including Steph Curry, Shaquille O’Neal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O’Leary.
Future
Bankman-Fried could be sentenced to life in prison without the possibility of supervised release if the federal government presses accusations of wire fraud or bank fraud. It would be rare but not extraordinary to impose such a harsh penalty. For his huge ponzi scam, Ponzi scheme mastermind Bernie Madoff received a 150-year sentence, effectively a life sentence. The collapse of FTX already resulted in BlockFi Lending’s liquidation and has completely disrupted the market.
Some lawyers say the SBF is likely to be deported.
To summarize the story of SBF’s arrest, the chapter 11 bankruptcy of the company was announced after FTX claimed it had been hacked. Crypto exchanges of SBF with his second company along with many famous names emerged. Binance initially claimed to help FTT for the crypto markets’ benefits and later withdrew this claim. A class action lawsuit was filed against SBF and FTX, and SBF was arrested 2 weeks later.
And that covers all for SBF’s arrest. Is The FTX scandal, which hit the crypto world like a bomb last month, finally coming to an end? We will convey you the news about the court’s decision on the subject as soon as we hear about it.
