Sam Bankman-Fried: the arrest of the disgraced crypto crusader

Another chapter in “the spectacular rise and fall of Sam Bankman-Fried”, founder of the failed crypto exchange FTX, said DealBook in The New York Times: he was arrested in the Bahamas on Monday.

Federal prosecutors in Manhattan are seeking extradition on multiple charges, including defrauding investors and money laundering. “The arrest took many by surprise.” Lawyers said the government may have “moved faster than expected” to avoid “muddying the waters” following Bankman-Fried’s recent “media tour”.

Still, the loquacious entrepreneur hasn’t always helped his own cause. “Like I, like, kind of vaguely knew, kind of, sort of maybe, um, on a qualitative level what was going on,” he told listeners on the Unusual Whales podcast, just before his arrest.

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“[He] built a house of cards on a foundation of deception while telling investors it was one of the safest buildings in crypto,” said Gary Gensler, head of the SEC, which has also filed civil charges. Wall Street’s main regulator alleges that FTX raised more than $1.8bn from backers by “orchestrating a scheme to defraud”.

A big part of that, said Bloomberg, was keeping them in the dark about the undisclosed “diversion” of some $8bn in FTX customer funds to its trading affiliate, Alameda Research.

More than 100 FTX-related companies, including Alameda, have filed for bankruptcy. Yet, so far, the criminal and civil charges “have focused entirely on Bankman-Fried” – raising questions about whether other executives “have been cooperating with prosecutors”.

Indeed, Bankman-Fried could be forgiven “for mulling over past financial scandals with a degree of envy”, said Antony Currie on Reuters Breakingviews. No bank bosses, after all, were brought to book for their role in the financial crisis. Unlike them, he lacks the “cover of systemic risk”.