FTX founder Sam Bankman-Fried arrested in the Bahamas

US authorities say the former chief executive of the failed cryptocurrency exchange FTX Sam Bankman-Fried has been arrested in the Bahamas.

The US attorney’s office in New York on Monday said the founder of FTX was arrested at the request of the US government.

Mr Bankman-Fried is under criminal investigation by US and Bahamian authorities following the collapse last month of FTX.

The firm filed for bankruptcy on November 11, when it ran out of money after the cryptocurrency equivalent of a bank run.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the United States Attorney’s Office for the Southern District of New York,” US attorney Damian Williams said in a statement.

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

Since its collapse, FTX’s new management has called the cryptocurrency exchange’s management a “complete failure of corporate controls”.

FTX failed in the cryptocurrency version of a bank run, when customers tried to withdraw their assets all at once because of growing doubts about the financial strength of the company and its affiliated trading arm, Alameda Research.

On 12 December 2022, the Office of the Attorney General of The Bahamas is announcing the arrest by The Royal Bahamas Police Force of Sam Bankman-Fried (“SBF”), former CEO of FTX. pic.twitter.com/CRNeLPAbVp

— Latrae L. Rahming (DOC)🇧🇸 (@latraelrahming) December 12, 2022

Mr Bankman-Fried said that he took responsibility for FTX’s collapse and said he failed to grasp the amount of risk FTX and Alameda were taking on across both businesses.

One of the accusations made against Mr Bankman-Fried is that he arranged for Alameda to use customers’ assets in FTX to place bets in the market.

Exchanges like FTX are supposed to segregate customers’ deposits from any bets they place in the markets. Other financial companies have got into legal hot water for misusing customers’ deposits, one example being MF Global roughly 10 years ago.