Less white-sand beaches… more courtroom speeches. Disgraced crypto "wunderkind" Sam Bankman-Fried was arrested Monday in the Bahamas at the request of the US gov’t (see: $1B+ of customer funds missing). Instead of attending his scheduled remote testimony before Congress yesterday (with planned remarks feat. an F-bomb), the former FTX CEO appeared in Bahamian court. Earlier, US federal prosecutors had charged him with numerous counts of fraud and violations of campaign-finance regulations.
- New tech, old playbook… John Jay Ray III, who's overseeing FTX's bankruptcy, yesterday described the case to Congress as "old-fashioned embezzlement."
- 'Twasn't the season… Prosecutors accused SBF of criminal activity dating back to 2019 — long before crypto winter.
Everyone wants in… on FTX's punishment. While federal prosecutors brought criminal charges against SBF, the Securities and Exchange Commission filed a civil complaint charging FTX with scheming to defraud investors. Yesterday, SEC Chair Gary Gensler said SBF built a “house of cards on a foundation of deception.” Also yesterday, the Commodity Futures Trading Commission charged SBF, FTX, and Alameda Research (SBF's crypto hedge fund) with fraud.
- If convicted on all criminal charges, SBF could face life in prison. But he suggested in Bahamian court yesterday (notably wearing a suit instead of his trademark shorts) that he might fight extradition to the US.
- If he stays in the Bahamas, he could be sent to a prison known to be dangerously overcrowded. SBF's bail request was denied.
Centralized crypto could face consequences… FTX was a centralized exchange (it directly held customers' funds/crypto) controlled by only a few people (vs. a decentralized exchange). The consequences it faces could set precedents for other centralized crypto players. Lawmakers and regulators like the SEC and CFTC are debating who, exactly, has crypto-oversight power. But as they consider new regulations following FTX's meltdown, they mostly now agree on at least one point: whoever has oversight, controls need to be tighter.