The founder and former CEO of the cryptocurrency exchange FTX, Samuel Bankman-Fried, has been charged by the US authorities of a number of financial offences.
It is alleged that he purposefully misled clients and investors in order to profit himself and others, and that this contributed significantly to the multibillion-dollar collapse of the corporation.
On Monday (12 December), the US attorney’s office in New York said that the FTX founder had been detained in the Bahamas at the US government’s request.
Following FTX’s demise last month, Bankman-Fried is the subject of a criminal investigation by US and Bahamian authorities. When the company ran out of money following the cryptocurrency equivalent of a bank run, it filed for bankruptcy on 11 November.
Here is everything you need to know.
Who is Sam Bankman-Fried?
With an estimated net worth of $32 billion £26 billion), Bankman-Fried was one of the richest people in the world on paper. He was a well-known figure in Washington who gave millions of dollars to Democratic political campaigns and generally left-leaning political causes.
His FTX cryptocurrency exchange grew to become the second-largest in the world, but when reports questioned the stability of FTX’s balance sheet last month, the house of cards came tumbling down.
Customers quickly began requesting billions of dollars in withdrawals, but FTX was unable to accommodate them because it reportedly used its customers’ deposits to cover bad bets at Bankman-Fried’s investment arm, Alameda Research.
In a 13-page indictment, prosecutors claimed that Bankman-Fried had used customers’ funds to pay for costs, obligations and risky trades at Alameda Research, as well as to buy opulent real estate and make substantial political contributions.
Bankman-Fried recently claimed that he did not "knowingly" misuse his customers’ money, and said he is certain that his millions of irate clients would soon receive their money back.
One of the biggest political donors this year, Bankman Fried was also accused of making unauthorised contributions to political campaigns.
What could happen to Bankman-Fried?
According to Nicholas Biase, a spokesman for US prosecutors, Bankman-Fried may spend decades behind bars if found guilty of all the accusations levelled against him.
Bankman-Fried was arrested just a day before he and FTX’s current CEO, John Ray III, were scheduled to testify before the House Financial Services Committee. The financial situation at FTX was worse than it was at Enron, according to Ray, the restructuring expert who took over FTX on 11 November.
The Bahamian authorities intend to continue their own investigation into Bankman-Fried. “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law,” said Bahamian prime minister Phillip Davis in a statement.
Since FTX’s demise, Bankman-Fried has stayed in his opulent Bahamas compound in Nassau, where FTX keeps its headquarters. On Monday (11 December) night, Bankman-Fried’s spokesperson had no comment.
Is he dating Caroline Ellison?
Former workers of FTX and Alameda have said that Bankman-Fried was romantically involved with Caroline Ellison, a coworker and the CEO of Alameda Research.
According to Business Insider, sources told CoinDesk that both FTX and Alameda Research were run by Bankman-Fried’s inner circle of 10 roommates living in a $40 million (£32.6 million), and that “all of them either are — or have been — paired up in romantic relationships with one another.”
The consensus among all the sources - who agreed to speak about their experiences on the condition of anonymity - was that "It’s a place full of conflicts of interest, nepotism and lack of oversight.”
Ellison was the only staff member singled out by CoinDesk for allegedly dating Bankman-Fried at one point; no other particular relationships, either past or present, were revealed. Ellison did not respond to a request for a comment, according to the publication.