Sam Bankman-Fried Busted on Eve of Congressional Grilling

Sam Bankman-Fried, the fallen crypto king who presided over the fiery $32 billion implosion of FTX last month, was arrested by Bahamian authorities Monday after he was indicted in the U.S.

The 30-year-old Stanford grad was taken into custody on the eve of his planned testimony before Congress—and just hours after he said he was more afraid of photographers than being arrested.

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

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

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

It confirmed the SEC has authorized separate charges relating to Bankman-Fried’s alleged “violations of securities laws.”

The attorney general of the Bahamas—where Bankman-Fried and his cabal ran now-bankrupt cryptocurrency exchange FTX—said it expected the United States to seek his extradition.

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

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

He likely would have faced questions about alleged financial shenanigans that took place at FTX, including whether the company improperly shifted customers’ 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 into naming a new chief executive for FTX—John J. Ray III—in early November by lawyers advising the company at the time.

After he agreed to nominate Ray, Bankman-Fried received a “potential funding offer for billions of dollars to help make customers whole,” he wrote. But by 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 hear of the arrest, the timing of which she added “denies the public” an opportunity to get answers.

“It’s about time the process to bring Mr. Bankman-Fried to justice has begun,” 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’ve harmed over one 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 committed to 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 was not coming to the U.S. only because of the “paparazzi.”

“I don’t think I will be 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 over the specifics of Alameda’s operations, suggesting that he will try to cast blame on other executives for the debacle.

Experts previously told The Daily Beast that such an excuse may not absolve Bankman-Fried of culpability.

“It’s as though you came to me as a professor and said, ‘Hey, gosh, why did you let all that 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 doesn’t abdicate my responsibility to catch the cheating and grade properly.”

Since last month’s collapse, FTX and its execs 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 controls and such a complete absence of trustworthy financial information as occurred here,” the company’s new CEO, John J. Ray III, wrote in a bankruptcy filing on Nov. 17.

Read more at The Daily Beast.

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