Sam Bankman-Fried, the disgraced cryptocurrency executive, is predicted to comply with extradition to the US, in response to an individual briefed on the matter, as he faces charges that he orchestrated a yearslong fraud culminating last month within the collapse of his crypto exchange, FTX.
In the US, Mr. Bankman-Fried, 30, has been charged with using his customers’ FTX deposits to make lavish real estate purchases, spend money on other firms and donate funds to politicians. Mr. Bankman-Fried was arrested last Monday at his luxury apartment complex within the Bahamas. After being held overnight in a police cell, he was denied bail by a judge within the Bahamas on Tuesday and transferred to the island’s notorious Fox Hill prison.
In court on Tuesday, Mr. Bankman-Fried said he wouldn’t waive his right to challenge the extradition. But after just a few days in prison, he’s now inclined to go together with the extradition, though his decision could still change, in response to the person briefed on the matter, who requested anonymity to debate sensitive legal deliberations. He is predicted to state his latest position at a court hearing as early as Monday, the person said.
An extradition sets up what is going to likely grow to be a monthslong legal drama in the US. On Tuesday, prosecutors for the Justice Department’s Southern District of Latest York unsealed a 13-page criminal indictment, charging Mr. Bankman-Fried with eight counts, including wire fraud against customers and lenders, in addition to conspiracy to defraud the US.
Once he’s transferred to the US, Mr. Bankman-Fried might be arraigned in federal court in Manhattan and have a latest bail hearing.
What to Know About the Collapse of FTX
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What’s FTX? FTX is a now bankrupt company that was considered one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency generally known as FTT. The corporate, based within the Bahamas, built its business on dangerous trading options that aren’t legal in the US.
Who’s Sam Bankman-Fried? He’s the 30-year-old founding father of FTX and the previous chief executive of FTX. Once a golden boy of the crypto industry, he was a significant donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to present away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last 12 months, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Mr. Bankman-Fried, receiving quite a lot of FTT tokens in exchange. In November, Mr. Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability. The move, which drove down the worth of FTT, spooked investors.
What led to FTX’s collapse? Mr. Zhao’s announcement drove down the worth and spooked investors. Traders rushed to withdraw from FTX, causing the corporate to have a $8 billion shortfall. Binance, FTX’s foremost rival, offered a loan to save lots of the corporate but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Why was Mr. Bankman-Fried arrested? FTX’s collapse kicked off investigations by the Justice Department and the Securities and Exchange Commission focused on whether FTX improperly used customer funds to prop up Alameda Research, a crypto trading platform that Mr. Bankman-Fried had helped start. On Dec. 12, Mr. Bankman-Fried was arrested within the Bahamas for lying to investors and committing fraud. The day after, the S.E.C. also filed civil fraud charges.
After the costs were filed, Mark Cohen, a lawyer for Mr. Bankman-Fried, said his client was “reviewing the costs together with his legal team and considering all of his legal options.”
The news that Mr. Bankman-Fried was expected to comply with extradition was first reported by Reuters.
The collapse of FTX was a rare fall for Mr. Bankman-Fried, a crypto celebrity who testified in front of Congress and was on the forefront of an effort to make the technology mainstream.
He founded FTX in Hong Kong but moved the corporate to the Bahamas in late 2021, capitalizing on the country’s friendly regulatory posture toward crypto. He also marketed the corporate aggressively in the US: His face was plastered on advertisements, and he rubbed shoulders with actors and star athletes, cultivating a fame as a hard-working do-gooder who intended to donate his vast wealth to charity. For some time, he was widely regarded as the second richest crypto industry mogul.
Whilst other crypto firms struggled this 12 months, FTX was viewed as a responsible company in a freewheeling, loosely regulated industry. That modified in early November, when a run on deposits revealed an $8 billion hole in the corporate’s accounts, forcing the exchange to file for bankruptcy on Nov. 11. Its collapse has rocked the industry, sending crypto prices spiraling and forcing one other major crypto company, the lender BlockFi, to file for bankruptcy.
Mr. Bankman-Fried resigned the day of FTX’s bankruptcy filing. He was replaced by John Jay Ray III, a lawyer who focuses on restructuring troubled firms. In bankruptcy filings and testimony to Congress, Mr. Ray has harshly criticized Mr. Bankman-Fried’s management, calling it a “complete failure of corporate control.”
Within the early 2000s, Mr. Ray oversaw the unwinding of Enron, the energy trading firm that collapsed in an accounting scandal. But he said in a court filing that the mess at FTX was the worst he had ever seen.
Since he was denied bail within the Bahamas, Mr. Bankman-Fried has been held on the Fox Hill correctional center in Nassau, the country’s capital, in a room with five other people.
Known amongst locals as “Fox Hell,” the prison has been widely criticized for its harsh conditions. Running water contained in the prison is sparse, beatings from guards are common and inmates sometimes defecate in buckets, in response to former prisoners, members of the family of inmates and a U.S. State Department report.
The Aftermath of FTX’s Downfall
The sudden collapse of the crypto exchange has left the industry stunned.
A former Fox Hill prisoner released last 12 months, Sean Hall, said he was briefly incarcerated in maximum security, where he was crammed right into a cell no wider than his wingspan with five other inmates. They slept on metal bunk beds without mattresses, he said, and woke up covered in bug bites.
“It’s no living condition for no sort of living being,” Mr. Hall said.
Doan Cleare, the prison’s head administrator, declined to permit a Latest York Times reporter and photographer to enter the prison grounds. He wouldn’t give many details on Mr. Bankman-Fried’s condition, except to say that the FTX founder was within the medical facility for reasons that couldn’t be specified. He described the medical facility as a “dorm-style apartment.”
“There’s no preferential treatment,” Mr. Cleare said, noting that the prison is undergoing renovations to enhance conditions.
Mr. Bankman-Fried’s parents, the Stanford Law School professors Joe Bankman and Barbara Fried, visited the prison on Thursday, dropping off clothes and medicine, in response to an individual aware of the matter.
In addition they deposited money in Mr. Bankman-Fried’s commissary account, Mr. Cleare said, but weren’t permitted to see their son.
Royston Jones, Jr. and Amanda Holpuch contributed reporting.