Dhe founder and former boss of the now bankrupt crypto exchange FTX, Sam Bankman-Fried, who was arrested on suspicion of fraud, will not be released until the trial date due to the risk of absconding. A judge in the Bahamas on Tuesday refused to post bail for Bankman-Fried and instead sent him to a local correctional facility.
Bankman-Fried, who was arrested in the Bahamas the day before, bowed his head and hugged his parents after the judge denied bail on the grounds that there was a “high” risk of absconding. He will be taken to a prison in the island state by February 8, where he will initially be housed in the medical department. He faces up to 115 years in prison if convicted on all eight counts.
Prosecutors accuse Bankman-Fried of embezzling customer funds
Prosecutors and authorities in the US had previously filed lawsuits against Bankman-Fried. Among other things, he embezzled the deposits of FTX customers to pay expenses and debts and to make investments on behalf of his crypto hedge fund Alameda Research, the federal prosecutor said. He also violated campaign fundraising regulations. The SEC and the CFTC, which is responsible for regulating the options markets, also accused the 30-year-old of fraud in their own complaints.
Bankman-Fried himself indicated during the court hearing in the Bahamas that he could challenge a US extradition request. There, FTX filed for bankruptcy protection on November 11 after customers withdrew en masse in response to the secret movement of $10 billion in deposits. Bankman-Fried resigned as boss the same day.
Bankman-Fried has apologized to customers but denied allegations of fraud. In 2020, he donated a good five million dollars to Joe Biden’s presidential campaign. The collapse of FTX has rocked the crypto world. Politicians and authorities around the world – including the ECB – are increasingly addressing calls for more regulation of the sector.
New FTX boss John Ray painted a damning picture of conditions at the company under Bankman-Fried at a congressional hearing on Tuesday. “The collapse of the FTX group can apparently be attributed to the absolute concentration of power in the hands of a small group of extremely inexperienced and unskilled individuals,” he told a committee. There were “absolutely no internal controls”. Ray deemed FTX’s financial records unreliable. “We’ve lost eight billion dollars in customer funds,” he told lawmakers. “So, by definition, I don’t trust a single sheet of paper in this organization.”
After graduating, Bankman-Fried first worked for a broker on Wall Street and set up his own business with Alameda in 2017. Two years later, with money from cryptocurrency speculation, he founded FTX, whose business grew explosively. In 2021, the trading volume accounted for ten percent of the world market. In the same year, he landed on Forbes magazine’s list of the richest Americans with an estimated fortune of $26.5 billion.