Authorities arrest Sam Bankman-Fried on FTX fraud and money laundering

Cal Jeffrey

Posts: 3,782   +1,204
Staff member
What just happened? Investors taken to the cleaners by Sam Bankman-Fried's FTX exchange will probably be pleased to hear that the man who admittedly made a lot of "mistakes" that cost them their money is in police custody today on fraud and money laundering charges. He was arrested last night in his Bahamian headquarters at the request of US officials.

Sam Bankman-Fried was scheduled to testify before Congress today, but he won't make that appointment. Bahamian police arrested the former cryptocurrency magnate on Monday night at the request of US authorities. Bankman-Fried will remain in custody in the Bahamas as he awaits extradition to the United States.

"S.B.F.'s arrest followed receipt of formal notification from the United States that it has filed criminal charges against S.B.F. and is likely to request his extradition," said Bahamian officials.

The New York Times reports that prosecutors confirmed that they had pressed charges against SBF in a sealed indictment to be opened later today. An anonymous source says the offenses include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. The Securities and Exchange Commission said it will formally announce separate charges related to securities violations later today.

The source says that SBF is the only suspect listed in the indictment. However, criminal conspiracy, by definition, always involves more than one person. Therefore we can expect more arrests if the insider's information is accurate.

Bankman-Fried's fall from grace comes after a series of events that unfolded in a matter of days. The billionaire's crypto exchange, FTX, began floundering due to — as SBF has put it — "bad decisions." He had bailed out other crypto businesses and sunk a ton of money into advertising his FT Token (FTT). It got to the point where FTX needed a bailout.

Binance offered to buy FTX, but before the deal could be made formal, the Federal Trade Commission opened an investigation into the exchange for potentially mishandling investors' deposits. The news caused FTT investors to panic resulting in a "bank run" that revealed an $8 billion deficit in FTT funds owed to investors.

The total valuation of FTX virtual evaporated overnight. Investors were angry, and the US government wanted answers. Congress subpoenaed SBF to appear and testify about the collapse. His testimony was scheduled for today, Tuesday, December 13. However, on Monday, someone leaked a private group message thread between SBF, Binance CEO Changpeng Zhao, Kraken exchange founder Jesse Powell, and Tether CTO Paolo Ardoino.

The most newsworthy part of the conversation involved a heated argument between SBF and Changpeng Zhao (aka CZ) that saw the Binance chief accuse the FTX founder of market manipulation. Bankman-Fried flatly denied the allegation.

"I have made a number of mistakes over the past year but this is not one of them," SBF said in the conversation conducted via the encrypted messaging app Signal.

Zhao also accused him of trying to "depeg" Tether and of making wreckless crypto trades in the wake of the FTX implosion that threatened to send the entire crypto industry into a "meltdown," according to the Times.

It is unclear if the revelation of this discussion was a catalyst for SBF's subsequent arrest, but the timing is about right. The SEC and prosecutors could have seen Bankman-Fried as a flight risk and issued the arrest warrant before he could traipse off to parts unknown where extradition would have been a problem.

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Posts: 6,524   +7,467
His biggest mistake - he didn't run far enough. They probably fished him out of a jacuzzi.

In fairness, nobody would harbor this prick after what he did. Even China and Russia would deny him refuge, as they all hate crypto. However, Russia might have kept him on ice, just to piss off the US - come on over, tovarish, we've got snow to shovel ;)

I hope he goes in for long, trade his NFT-s for golden showers in a joint, is what they're worth.
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Posts: 5,119   +6,740
Frankly, Changpeng Zhao should be in jail too because he manipulated the crypto market, killed FTX and crashed the price of crypto around the world with his little FTX stunt. FTX was going down, it was only a matter of time, but Changpeng Zhao bought and sold crypto with the intent of crashing FTX. This is not speculation, he openly admits this.

While FTX had to go down there was cleaner way for Zhao to do it. Zhao is just as guilty as Bankman


Posts: 928   +1,451
SBF said as recently as yesterday that he didn't believe he would be arrested if entering the US. Instead the reason he wouldn't be physically testifying in front of Congress was that he was "quite overbooked" and for security reasons due to the "paparazzi effect".

Here's the relevant part of the interview:
Unusual Whales said:
Molly: Okay. Um, so I want to go back to the question that Tracy answered about the hearing tomorrow.

SBF: Yep.

Molly: Why are you not appearing in person?

SBF: I have a, uh, I’m here in the Bahamas where I have been for last year where you know, FTX International had been run for and run from and, um, you know, doing what I can to support basically like all of the kind of global teams who have been, you know, by running FTX International prior to and after. Um,

Molly: but you have left the Bahamas in the past few years for important engagements in Washington. Why not now? This seems pretty important.

SBF: I have at some point. There's, it's also frankly a pretty important time for me to be here. Um, I'm quite overbooked and was not planning to be testifying until like very recently. Um, and then the other thing that will say is something I need to get a better handle on, but from a security standpoint, like I've been, uh, for reasons that I completely understand, um, and, uh, although it's frustrating, I feel like, um, I, I, I, I suspect as much like food for something like this where people are coming from on this. Um, it's very difficult for me to move right now and travel because just like the paparazzi effect is quite large. I'm not sure.

Molly: Are you worried you might be detained if you stepped foot into the US?

SBF: Uh, I don't believe I would be, but I haven't done a, like deep dive into that at some point. Right. That's something I have to think harder about.

Molly: And then there is a Senate hearing coming up this week as well. Are you planning to appear at that?

SBF: Um, I, I, I am not currently. Um, I, I, I'm not currently scheduled to do that. Um, and, uh, sorry, I know this is a, a bit of a halting answer. Um, I'm not currently scheduled to do that. Um, I am open and willing to have a conversation with, um, you know, with the, the chair of the ranking member, uh, about the hearing, uh, if they believe it's important that I attend, um, it's,

Molly: I think they believe it's important that you attend.

SBF: I'm sure they, I'm sure they do. I think like I, I do expect that it'll be at a very materially similar hearing 24 hours earlier. And so I think, you know, from my perspective, the, the biggest thing I'm thinking about is like, what is the relationship between these and what is it that the American people and that, you know, our, our policymakers and lawmakers would be getting from the, uh, you know, from the second one of those that would not be duplicative, um, you know, with the, the first one, um, uh, but it's, you know, that's a conversation I'm, I'm, I'm very willing to have an, and, uh, I've in fact expressed my, I don't think publicly, but have expressed my openness to having that conversation with them.


Posts: 1,490   +1,080
Some of his replies were like - I don't think it was fraud or a scam - see if he gets more time the Theranos woman Elizabeth Holmes


Posts: 1,400   +2,117
The details of this are going to be really interesting. It's clear he was minimum reckless, negligent, and less than forthcoming. I'm not sure he's actually socked away hard assets or even crypto somewhere safe for himself though. It is possible that others did that. Or maybe they all did.

At one point I thought he was maybe buying off the Bahamian authorities by transferring all the assets to them, but maybe he was less buying them off than being leaned on hard for nothing in return.

The unsealed indictment was pretty vague on exactly what he did that violated the law. My understanding is co-mingling of crypto deposits is not illegal yet. There's also testimony from the current CEO that FTX had the worst controls and accounting systems he's ever seen, maybe leaving room for SBF to claim "he just didn't know" and giving the authorities an uphill battle in proving he did. OTOH he's talking in public way too much and given the scope here a jury may not be that fussy on the exact details.

I also don't know how bankruptcy works in terms of currency. If I held $10,000,000 in "ftx tokens" in his exchange, which he "borrowed" from me and lost, but now the value of those tokens has crashed to near zero anyway, can he just give me a couple nickels and say I've been made whole at the current value?

Part of me is hoping there's a newly billionaire intern in Vanuatu just laughing his head off. (not really, I don't actually want anyone to lose their money, but the idea of the random person you'd never suspect having taken it all cracks me up for some reason.)


Posts: 780   +2,415
Lol...I bet his seriously hot girlfriend (/s) has turned on him with a plea bargain deal.