After FTX’s bankruptcy in the US last month, Sam Bankman-Fried, the founder of the collapsed cryptocurrency exchange, was arrested in The Bahamas on Monday.
The former boss and chief executive has appeared in a magistrates’ court in the Caribbean country’s capital, Nassau on Tuesday, and could face years in prison if convicted.
The 30-year-old Bankman-Fried was arrested for “financial offences” against laws in the US and The Bahamas, with allegations that he used billions of dollars of customer funds to prop up FTX’s sister company, Alameda Research, a company whose balance-sheet shortfall may have speeded up the crypto empire’s downfall in the first place.
It was revealed that the company’s books relied heavily on cryptocurrency that was issued by FTX, and 40% of the company’s assets were denominated in the FTX token (FTT).
Court documents now show that Alameda Research borrowed FTX customer funds for trading and investment purposes without any limits, and it seemed that customer assets were easily accessible to FTX’s sister platform.
Bankman-Fried was charged with eight counts including conspiracy to commit wire fraud on customers and lenders, money laundering and violations of campaign finance laws, and has reportedly been denied bail. The magistrate overseeing the case has ordered that the former chief executive should remain in custody until early February.
According to a court filing, FTX still owes its 50 largest creditors almost $3.1bn (£2.5bn). And the collapse has severely shaken confidence of users in what was already a very troubled crypto market, resulting in a negative downturn over the last month.
It is unclear if people, who had funds in FTX, will get all their money back at the end of bankruptcy proceedings – though many experts are warning it could be a small fraction of what they once deposited.
Mr Bankman-Fried was once regarded as a younger version of the famed US investor Warren Buffett, and had a net worth estimated at more than $15bn a little less than two months ago.
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