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      • Who is Sam Bankman-Fried, Founder...
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      Who is Sam Bankman-Fried, Founder Of Crypto Exchange, Arrested In Bahamas?

      The Securities and Exchange Commission (SEC) of the United States charged Sam Bankman-Fried with defrauding investors in the company.

      By - Sourit Sanyal | 13 Dec 2022 3:02 PM GMT
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    • Who is Sam Bankman-Fried, Founder Of Crypto Exchange, Arrested In Bahamas?
      Listen to this Article

      On Monday, Sam Bankman-Fried, the founder of FTX and Alameda Research was arrested in the Bahamas after being criminally charged by US prosecutors. He was earlier slated to testify in the US Congress on Tuesday before getting arrested by the Royal Bahamas Police Force.

      Bankman-Fried was set to testify before the House tomorrow. Tonight he was arrested.

      While I am disappointed we will not have the opportunity to present our line of questioning, we look forward to more information coming to light and justice being served in this case. https://t.co/HS9u1n5Kur

      — Alexandria Ocasio-Cortez (@AOC) December 13, 2022

      This marks a sharp fall from grace for Bankman-Fried, who often goes by the abbreviation SBF. His arrest comes after FTX filed for bankruptcy in November after being unable to fulfil customers' withdrawal requests.

      Here's the journey of the 30-year-old crypto entrepreneur, whose empire went from riches to rags in a time span of one week.

      The Rise of FTX

      It all started when a 25-year-old Sam Bankman-Fried founded Alameda Research in 2017. A proprietary trading firm that was involved with cryptocurrencies, Alameda Research made money from buying and selling crypto, pursuing various trading strategies to generate money from volatility, a riskier business model, as mentioned by the Wall Street Journal.

      The 2014 MIT alumnus later founded FTX (Future Exchanges), a cryptocurrency exchange in 2019, with headquarters in Nassau, the Bahamas. Unlike Alameda, FTX facilitated others in cryptocurrency exchange.

      In simple terms, FTX was the agent that would help you find a buyer or even a seller for crypto. The company made money by allowing customers to trade crypto and collecting fees for transactions.

      The exchange was quick to dominate the industry within a span of three years. In January 2022, the company was valued at $32 billion, making FTX CEO Sam Bankman-Fried one of the key figures of the cryptocurrency world, a volatile industry.

      With the funds came political clout and SBF became the fifth largest mega-donor of the 2022 US midterm elections. After hedge fund founder Geroge Soros, SBF was the second-biggest Democratic donor, where the FTX founder donated a total of $39.2 million.

      The Fall of FTX

      Things took a drastic turn for FTX when CEO Bankman-Fried resigned from FTX on November 11, with the cryptocurrency exchange company filing for bankruptcy after a liquidity crisis.

      FTX's downfall came as a surprise as it was deemed one of the most stable crypto firms in the world. The situation was closely linked to transactions between Alameda Research and FTX.

      FTT, a digital currency created by FTX, was also linked to the crisis. Days before the declaration of bankruptcy, another cryptocurrency exchange Binance announced it would dump $500 mn worth of token holdings in FTX. Binance's action was prompted by the news carried by Coindesk, a cryptocurrency news website, about "unusually close" ties between FTX and Alameda Research.

      The report had said, "That balance sheet is full of FTX – specifically, the FTT token issued by the exchange that grants holders a discount on trading fees on its marketplace. While there is nothing per se untoward or wrong about that, it shows Bankman-Fried's trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto. The situation adds to evidence that the ties between FTX and Alameda are unusually close."

      This triggered investors to sell FTT tokens in a panic, with the value of the tokens plummeting. Traders withdrew $6 billion from the crypto exchange within a time span of 72 hours. Alameda Research then bought FTT tokens to keep prices up but failed to do this successfully.

      It was found Bankman-Fried secretly transferred $10 billion of customer funds to Alameda Research, as reported by Reuters. The report also mentioned how at least $1 billion of customer funds vanished from FTX.

      The Washington Post reported on November 20 that FTX owed its creditors at least $3 billion and 10 of its creditors are owed at least $100 million.

      The Arrest Of Sam Bankman-Fried

      Reuters reported that SBF was arrested from his luxury gated apartment complex called the Albany in Nassau. Following the arrest, the Royal Bahamas Police Force said that the former FTX CEO will appear in a Bahamian magistrate court.

      The Bahamas and the United States share an extradition treaty that allows the two countries to hand over people who face criminal charges. In SBF's case, the NYT reported how the entrepreneur faces fraud and money laundering charges. The NYT also quoted the Bahamian government saying, "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."

      Reuters also mentioned how the Bahamas attorney general's office expects the extradition of Sam Bankman-Fried to the United States. The arrest marks an implosion of the crypto empire SBF built in 2017, that saw an unprecedented growth within a span of 3-5 years before its rapid downfall within a week's period, showcasing the volatile nature of the cryptocurrency industry.

      The US Securities and Exchange Commission (SEC) charged SBF with defrauding investors in the company. The Guardian quoted the SEC, saying, "The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd, the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing."

      Tags

      Sam Bankman-FriedCryptocurrencyCryptocurrenciesCryptoFTX
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