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FTX founder Bankman-Fried’s bail denial could increase chance of extradition

By Jack Queen

(Reuters) – FTX founder Sam Bankman-Fried’s failure to secure release on bail in the Bahamas on Tuesday increases the likelihood that he will consent to extradition to the United States to face fraud charges, legal experts said.

A judge ordered Bankman-Fried to be held at the Bahamas Department of Corrections until at least Feb. 8, citing his “great” risk of flight after New York federal prosecutors unveiled charges against him over the collapse of his once high-flying crypto exchange, FTX.

Before his bail was denied, Bankman-Fried’s lawyer said his client was not waiving his right to extradition proceedings. If he fights removal, the process could involve up to a year or more of hearings and appeals with little hope of success in the end, experts said.

The facility where Bankman-Fried is being held is also known as Fox Hill Prison. A lawyer for Bankman-Fried did not immediately respond to a request for comment.

Attorneys who specialize in extradition say time locked up overseas often encourages defendants to consent to being transferred to their home countries.

“The extradition process can take a year or longer,” said David Haas, a U.S. lawyer who has defended people facing extradition. “Usually people don’t want to sit in a jail overseas. That tends to be a major factor in whether someone challenges extradition.”

A Bahamian corrections official said on Tuesday that Bankman-Fried will initially be held in the facility’s medical department until staff determine the appropriate place for him. Bankman-Fried is scheduled to appear before another Bahamian magistrate judge on Feb. 8.

Like most extradition treaties, the U.S.-Bahamas agreement requires alleged offenses to be considered crimes in both countries. Bankman-Fried is unlikely to convince a Bahamian court that the securities fraud and wire fraud he stands accused of are not illegal in the Bahamas, attorneys said.

“Bahamian law generally reflects American law in these matters,” said white-collar criminal defense attorney Jack Sharman. “I wouldn’t expect differences in the law to be a big extradition problem.”

Bankman-Fried could also argue that he would not receive a fair trial in the United States, would face unjust punishment there or would suffer inhumane treatment, factors a Bahamian court would have to consider before releasing him for extradition.

That has helped some defendants delay extradition, most notably WikiLeaks founder Julian Assange, who has for years fought extradition from the UK to the United States to face charges for allegedly leaking classified military intelligence.

But U.S. prosecutors have recently won favorable rulings in Assange’s extradition proceedings by offering assurances that he would be kept safe in custody. The U.S. and Bahamian authorities could likely broker a similar agreement, Haas said.

“There’s usually a diplomatic component. This is all handled through treaties,” Haas said.

(Reporting by Jack Queen in New York; Editing by Amy Stevens and Matthew Lewis)

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U.S. SEC charges FTX ex-CEO with fraud -statement

WASHINGTON (Reuters) – The U.S. Securities and Exchanges Commission on Tuesday announced charges against the founder of cryptocurrency exchange FTX, Sam Bankman-Fried, accusing him of defrauding investors in what regulators called “a house of cards.”

In a statement, the SEC said it would seek an injunction to prevent Bankman-Fried from future securities trading except for his personal account and a civil penalty, among other actions.

Separate charges would be announced by the U.S. Attorney’s Office for the Southern District for New York and the Commodity Futures Trading Commission later on Tuesday, the SEC said.

(Reporting by Susan Heavey, Editing by Louise Heavens)

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Australia to reform mobile wallet, cross-border payments

SYDNEY (Reuters) – Australia’s central bank wants mobile wallet providers to offer least cost routing options for merchants by the end of 2024, under new regulatory powers set to be granted by the government.

In a speech on the payments system, Reserve Bank of Australia (RBA) Governor Philip Lowe said merchants should have the option of which mobile wallet service to use rather than being locked in to one system as is often the case now.

Wallet providers needed to finalise their plans and share them with the industry so the necessary investments across the payments ecosystem can get under way, said Lowe.

“Overall, we are optimistic that least-cost routing will help counter the forces that are adding to merchants’ payment costs, particularly for small businesses,” Lowe said.

The comments came as the government announced a shake up of regulations across Australia’s financial system that would update payment systems, regulate the Buy Now Pay Later sector and establish a framework to regulate crypto service providers.

As part of this, the RBA will be given new powers to regulate new and emerging payment systems, such as digital wallet providers.

Lowe said another area of reform was cross border transactions which were expensive and relatively slow in Australia.

As part of this, the RBA was pressing banks to allow the final Australian dollar leg of inbound crossbred payments to be processed through the national real-time payments system.

The industry had committed to providing this new service by Dec.1, 2023 and Lowe said he expected this deadline to be met by the banks.

(Reporting by Wayne Cole; Editing by Lincoln Feast.)

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FTX founder Sam Bankman-Fried charged with fraud, denied bail

By Jared Higgs, Luc Cohen and Chris Prentice

NASSAU, Bahamas/NEW YORK (Reuters) – U.S. prosecutors on Tuesday accused Sam Bankman-Fried, the founder of crypto currency exchange FTX, of fraud and violating campaign finance laws and a judge in the Bahamas denied him bail, sending him to a local correctional facility instead.

The former FTX CEO, who was arrested in the Bahamas on Monday, lowered his head and hugged his parents after the magistrate judge refused bail citing a “great” risk of flight.

He was ordered remanded to a correctional facility in the island nation until Feb. 8, where he will initially held in the medical department, according to a local official.

The day’s events capped a stunning fall from grace in recent weeks for the 30-year-old, who amassed a fortune valued over $20 billion as he rode a cryptocurrency boom to build FTX into one of the world’s largest exchanges before it abruptly collapsed this year.

Bankman-Fried has previously apologized to customers and acknowledged oversight failings at FTX, but said he does not personally think he has any criminal liability.

Earlier on Tuesday, U.S. Attorney Damian Williams in New York said Bankman-Fried made illegal campaign contributions to Democrats and Republicans with “stolen customer money,” saying it was part of one of the “biggest financial frauds in American history.”

“While this is our first public announcement, it will not be our last,” he said, adding Bankman-Fried “made tens of millions of dollars in campaign contributions.”

Bankman-Fried faces a maximum sentence of 115 years in prison if convicted on all eight counts, prosecutors said, though any sentence would depend on a range of factors.

Williams declined to say whether prosecutors would bring charges against other FTX executives and whether any FTX insiders were cooperating with the investigation.

In his first in-person public appearance since the cryptocurrency exchange’s collapse, Bankman-Fried appeared in court on Tuesday in the Bahamas, where FTX is based and where he was arrested at his gated community in the capital, Nassau.

He appeared relaxed when he arrived at the heavily guarded Bahamas court and told the court he could fight extradition to the United States.

Bahamian prosecutors had asked that Bankman-Fried be denied bail if he fights extradition.

“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” his lawyer, Mark S. Cohen, said in an earlier statement.

‘BRAZEN’ SCHEME

FTX’s current CEO, John Ray, told congressional lawmakers on Tuesday that FTX lost $8 billion of client money, saying the company showed “absolute concentration of control in the hands of a small group of grossly inexperienced, nonsophisticated individuals.”

In the indictment unsealed on Tuesday morning, U.S. prosecutors said Bankman-Fried had engaged in a scheme to defraud FTX’s customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC.

He also defrauded lenders to Alameda by providing false and misleading information about the hedge fund’s condition, and sought to disguise the money he had earned from committing wire fraud, prosecutors said.

Both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) alleged Bankman-Fried committed fraud in lawsuits filed on Tuesday.

The CFTC sued Bankman-Fried, Alameda and FTX on Tuesday, alleging fraud involving digital commodity assets.

Since at least May 2019, FTX raised more than $1.8 billion from equity investors in a years-long “brazen, multi-year scheme” in which Bankman-Fried concealed FTX was diverting customer funds to Alameda Research, the SEC alleged.

CRYPTO INVESTORS LOST BILLIONS

Bankman-Fried, who founded FTX in 2019, was an unconventional figure who sported wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Bill Clinton. He became one of the largest Democratic donors, contributing $5.2 million to President Joe Biden’s 2020 campaign. Forbes pegged his net worth a year ago at $26.5 billion.

FTX filed for bankruptcy on Nov. 11, leaving an estimated 1 million customers and other investors facing losses in the billions of dollars. The collapse reverberated across the crypto world and sent bitcoin and other digital assets plummeting.

The collapse was one of a series of bankruptcies in the crypto industry this year as digital asset markets tumbled from 2021 peaks. A crypto exchange is a platform on which investors can trade digital tokens such as bitcoin.

As legal challenges mount, the U.S. Congress is also looking at crafting legislation to rein in a loosely-regulated industry.

FTX has shared findings with the SEC and U.S. prosecutors, and is investigating whether Bankman-Fried’s parents were involved in the operation.

The attorney general’s office of the Bahamas said it expected Bankman-Fried to be extradited to the United States.

Bankman-Fried resigned as FTX’s CEO the same day as the bankruptcy filing. FTX’s liquidity crunch came after he secretly used $10 billion in customer funds to support his proprietary trading firm Alameda, Reuters has reported. At least $1 billion in customer funds had vanished.

(This story has been refiled with a corrected picture caption)

(Additional reporting by Luc Cohen and Jack Queen in New York and Hannah Lang, Chris Prentice and Susan Heavey in Washington; Writing by Nick Zieminski and Deepa Babington; Editing by Noeleen Walder, Megan Davies, Anna Driver and Matthew Lewis)

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Column-In the SEC’s suit against Bankman-Fried, what about the customers?: Frankel

By Alison Frankel

(Reuters) – Federal prosecutors and regulators from the U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission all told a similar story on Tuesday about Sam Bankman-Fried’s alleged scheme to divert billions of dollars of customers’ money from the FTX crypto exchange to Alameda Research LLC.

They all accused Bankman-Fried of fraud, asserting that he repeatedly lied when he insisted that FTX customers’ money was safe, secure and completely segregated from the affiliated but purportedly independent Alameda.

According to the indictment unsealed on Tuesday in federal court in Manhattan and separate complaints filed on Tuesday by the SEC and the CFTC, Bankman-Fried knew or should have known that money was being siphoned from FTX customer accounts to fund Alameda’s speculative trading and that, despite its repeated protestations to the contrary, FTX gave Alameda special trading privileges that ultimately proved disastrous for the platform and its customers.

Who were the victims of this alleged fraud?

The CFTC’s complaint highlighted the deception of FTX users who, in the regulator’s telling, were duped into believing that their money was safe. The Manhattan U.S. Attorney’s indictment also cited FTX customers as the victims of wire fraud and commodities fraud charges against Bankman-Fried.

But the SEC’s lawsuit focused on a different group of alleged victims: the investors that plowed $1.8 billion into FTX in a series of stock purchases between 2019 and 2022. (The 90 U.S.-based FTX shareholders held a $1.1 billion stake, the SEC said.)

Reuters has reported that FTX’s equity investors included such firms as Sequoia Capital, SoftBank Group Corp, BlackRock Inc and Temasek – not exactly small-time crypto customers who wanted to trade on the FTX platform and trusted Bankman-Fried’s promises that their money would be secure.

An important note here: Bankman-Fried’s lawyer, Mark Cohen of Cohen & Gresser, told Reuters on Tuesday that his client is “reviewing the charges with his legal team and considering all of his legal options.” The SEC, meanwhile, did not respond to my query about the framing of its lawsuit.

And to be fair, the SEC’s complaint, as I mentioned, cast FTX customers as victims, too, albeit parenthetically.

I’m being literal: The second sentence of the SEC’s complaint says, “Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”

My point is that the SEC’s pleading strategy in Tuesday’s lawsuit shows that crypto remains a big challenge for U.S. regulators. An alleged fraudster is accused of misappropriating billions of dollars from customers who wanted to buy and sell crypto, yet the foremost investor protection agency in the United States is not claiming securities fraud on behalf of those customers.

Securities law professor Ann Lipton of Tulane University School of Law said that’s probably because of regulatory uncertainty about which crypto assets meet the definition of a security. (As you know, that question, in turn, is the subject of intense litigation between the SEC and Ripple Labs Inc.)

“The SEC is limited to suing over securities fraud – and that requires the existence of a security,” Lipton said by email. “At the very least, each crypto asset would have to be analyzed individually to determine whether it was a security, which is presumably not feasible for customers who traded many different kinds of assets.”

By focusing instead on the individuals and funds that acquired an equity stake in FTX, Lipton said, “The SEC ducks that issue – those investors certainly bought securities in the form of stock.”

Former Manhattan federal prosecutor Timothy Howard of Freshfields Bruckhaus Deringer agreed: “It’s easier and more straightforward for the SEC to focus on equity investors.”

Unlike private shareholders who sue for securities fraud, the SEC does not have to prove that investors relied on alleged misrepresentations. (The U.S. Justice Department, which has charged Bankman-Fried with defrauding FTX equity investors in addition to FTX customers, similarly does not have to show reliance to prove securities fraud.)

“This greatly eases the SEC’s and DOJ’s prosecutions because it takes off the table all questions associated with the adequacy of investors’ due diligence,” Stanford Law School professor Joseph Grundfest said via email.

Many of the SEC’s allegations involve claims that FTX lied in publicly issued statements and reports on its websites. But, perhaps anticipating arguments from Bankman-Fried that he cannot be liable for general corporate statements, the SEC complaint did cite two instances in which FTX investors were allegedly misled by Bankman-Fried himself.

He gave a U.S. investor who had bought $35 million in FTX shares in July 2021 a document promising that FTX and Alameda did not comingle funds, according to the SEC. And in the late summer of 2021, the complaint alleged, Bankman-Fried told a potential U.S. investor who ultimately acquired a $30 million stake that FTX did not hold its native cryptocurrency, tokens known as FTT.

Bankman-Fried, according to the SEC, knew or should have known that his statement to the investor was false.

Those specific allegations, said Freshfield’s Howard, seem intended to show Bankman-Fried that FTX investors are cooperating with the government – and that he can’t evade liability simply by claiming he wasn’t aware of FTX’s public statements.

Looking way down the road at the potential fallout from FTX’s collapse, I’ll be interested to see if any FTX customers or creditors attempt to pin blame on the equity investors that are cast as victims in Tuesday’s SEC complaint, arguing that their due diligence failures enabled the platform’s subsequent alleged misconduct.

If that happens, it will be even more interesting to see if FTX’s equity investors point to their depiction in the SEC complaint as evidence that they, too, were victimized by Sam Bankman-Fried.

(Editing by Leigh Jones and Himani Sarkar)

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Explainer-Sam Bankman-Fried: Who is FTX’s founder and why was he arrested?

By Hannah Lang and Tom Hals

(Reuters) – FTX founder Sam Bankman-Fried was arrested in the Bahamas on Monday and charged by the U.S. Department of Justice on Tuesday with defrauding investors in what regulators called a “brazen, multi-year scheme” that ended when his empire filed for bankruptcy last month.

Here is the latest on the collapse of FTX and what comes next for Bankman-Fried:

WHO IS SAM BANKMAN-FRIED?

Bankman-Fried was raised in California by two Stanford University law professors, Joseph Bankman and Barbara Fried.

Bankman-Fried, 30, started his career at Jane Street Capital after graduating from the Massachusetts Institute of Technology, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.

He amassed a fortune taking advantage of the price differences in bitcoin in Asia and the United States after departing Jane Street in 2017. He eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion. Forbes estimated a year ago that Bankman-Fried’s fortune was as high as $26.5 billion.

Bankman-Fried stepped down as CEO of Alameda in October 2021 and ceded the role to Caroline Ellison and Sam Trabucco, who acted as co-CEOs until Trabucco departed the firm in August.

In a Twitter Spaces event held on Dec. 1, Bankman-Fried acknowledged that he and Ellison had “been together for a while,” although he declined to give any more details.

Ellison did not immediately respond to a request for comment.

Known in financial circles by his initials, SBF, Bankman-Fried was an unconventional figure known for his wild hair, t-shirts and shorts. He contributed $5.2 million to President Joe Biden’s 2020 campaign and became one of the largest donors to Democratic political candidates.

WHY DID FTX COLLAPSE?

FTX filed for bankruptcy on Nov. 11 after it struggled to raise money to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

Bankman-Fried has said that Alameda had built up a substantial position on FTX and that as digital asset prices plummeted this year, Alameda became increasingly more levered.

“Realistically speaking, (there was) no ability for FTX to be able to liquidate that position and generate everything that was owed,” he said at the New York Times’ DealBook Summit in a Nov. 30 interview with Andrew Ross Sorkin.

The liquidity crunch at FTX came after Bankman-Fried secretly moved $10 billion of FTX customer funds to Alameda Research, two people familiar with the matter told Reuters.

Bankman-Fried told Reuters in November the company did not “secretly transfer” but rather misread its “confusing internal labeling.”

He also told Sorkin that he “wasn’t trying to comingle funds,” but said that when FTX did not have a bank account, some customers wired money to Alameda and were credited on FTX, which likely led to discrepancies.

WHY WAS HE ARRESTED?

Bankman-Fried was arrested in the Bahamas at the behest of U.S. prosecutors shortly after 6 p.m. on Monday (2300 GMT). The Bahamas attorney general’s office said it expects he will be extradited to the United States.

U.S. prosecutors said Bankman-Fried had engaged in a scheme to defraud FTX’s customers by misappropriating their deposits to pay for Alameda’s expenses and debts and to make investments.

He also defrauded lenders to Alameda by providing them with false and misleading information about the hedge fund’s condition, and sought to disguise the money he had earned from committing wire fraud, prosecutors said.

Separately, Bankman-Fried was sued by regulators on Tuesday.

The U.S. Securities and Exchange Commission alleged Bankman-Fried defrauded investors in FTX by raising more than $1.8 billion in equity while concealing that the company was diverting customer funds to Alameda.

Also on Tuesday, the U.S. Commodity Futures Trading Commission accused Bankman-Fried and his companies of fraud and making fraudulent misstatements of material fact.

Bankman-Fried said he was pressured into filing for bankruptcy and into nominating John Ray as chief executive of FTX in November by Sullivan and Cromwell lawyers who were advising his firm at the time, according to a draft of his testimony to Congress seen by Reuters that he had prepared to give on Tuesday.

FTX did not immediately respond to a request for comment.

WHAT WILL HAPPEN TO HIM NOW?

Bankman-Fried is expected to be extradited to the United States where he will be formally arraigned and a judge will determine if he will be held in jail or released until his trial. Bankman-Fried said on Tuesday, however, that he would not waive his right to an extradition hearing.

Prosecutors and regulators would typically agree that the criminal charges, which have a higher burden of proof, would be pursued while the civil cases are stayed, according to legal experts.

Bankman-Fried could try to work out a deal that encompasses both the criminal and civil cases.

Prosecutors will seek restitution for proceeds derived from Bankman-Fried’s alleged crimes, but it may be difficult to locate assets, according to legal experts.

(Reporting by Hannah Lang in Washington and Tom Hals in Wilmington, Del.; Editing by Matthew Lewis)

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Bankman-Fried seeks bail in Bahamas magistrate court

NASSAU (Reuters) – Former FTX CEO Sam Bankman-Fried’s lawyer on Tuesday requested bail for the one-time crypto magnate after Chief Magistrate JoyAnn Ferguson-Pratt ruled that Bankman-Fried had the right to apply for it.

(Reporting by Jared Higgs in Nassau)

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Bankman-Fried Bahamas court hearing adjourned to consider bail jurisdiction

(Refiles to correct GMT time)

NASSAU (Reuters) – Former FTX CEO Sam Bankman-Fried’s hearing in a Bahamas magistrate court is adjourned until 2:15 p.m. (1915 GMT) on Tuesday to consider whether the court has jurisdiction over bail, said Chief Magistrate JoyAnn Ferguson-Pratt, who is overseeing the hearing.

(Reporting by Jared Higgs)

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Bankman-Fried charged with fraud in FTX’s collapse

(Reuters) – Here are reactions to accusations of fraud and other charges brought on Tuesday against Sam Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX.

OMID MALEKAN, adjunct professor at Columbia Business School: “As the details of the prosecution roll out, FTX clients will have more information about how much of their money they might someday get back, and the industry will have a better idea of what contagion may remain. These are both positive developments and will make it easier for the market to move on.”

“It certainly seems that between the Justice Department and the SEC, the hammer is being brought down (on Bankman-Fried). The tell that something was brewing may have been the leaked testimony of the current caretaker of FTX that he’s going to present in the congressional hearing today.”

VIKTOR PROKOPENYA, founder of crypto platform Currency.com:

“It is unsurprising that Bankman-Fried is now in U.S. custody and I hope the authorities are able to ensure all those who lost their money can see those responsible held to account.” 

“The crypto sector must see the demise of FTX as a wake-up call. We must begin to engage proactively with regulators to find a middle ground which prevents an FTX-type situation ever occurring again.” 

DAVID SCHWED, chief operating officer at blockchain security firm Halborn:

“Sam’s arrest is overall a positive event for the crypto ecosystem.”

“I’m hopeful that this will lead to increased regulation and oversight in the sector which will help restore the trust and confidence in the crypto market. It will also serve as a deterrent for others.”

ERIC PETERS, CEO of One River Asset Management, said to AI investing and trading platform Magnifi+:

“When the FTX news hit, I told our team that I think this marks the beginning of the end of this bear market. I didn’t mean that it would end on the day, but it’s when big things like this big fraud happen. They don’t happen at the highs, they happen more or less in the range of the lows. Thankfully, we didn’t have any exposure. Our investors didn’t have any exposure.”

MARCUS SOTIRIOU, market analyst at digital asset broker GlobalBlock:

“SBF was supposed to testify under oath before Congress today, who would then charge him with a crime, hence prosecutors have potentially saved SBF from incriminating himself. Nonetheless, SBF may have already incriminated himself enough.”

STEFAN RUST, CEO of blockchain development house Laguna Labs

“Overall, this is having a very positive impact on the industry as it shows that, in the crypto world, you cannot get away with stealing customers’ money.”

(Compiled by the Global Finance & Markets Breaking News team; Editing by Matthew Lewis)

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Binance withdrawals hit $1.9 billion in 24 hours, data firm says

By Tom Wilson and Elizabeth Howcroft

LONDON (Reuters) – Binance has registered $1.9 billion of withdrawals in the past 24 hours, blockchain data firm Nansen said on Tuesday, as the world’s biggest crypto exchange said it had “temporarily paused” withdrawals of the USDC stablecoin.

How crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators. FTX founder Sam Bankman-Fried was charged by the U.S. Securities and Exchange Commission on Tuesday with defrauding investors.

Binance, whose dominance of crypto was cemented by the fall of FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of bitcoin exceeded customer deposits on a single day in November.

The $1.9 billion of withdrawals of tokens based on the ethereum blockchain mark the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.

“Binance’s withdrawals are increasing due to the growing uncertainty about its reserves report,” a Nansen spokesperson said.

The withdrawals were “business as usual,” Binance CEO Changpeng Zhao tweeted. “We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits.”

A Binance spokesperson earlier said it always had “more than enough funds” to meet withdrawal requests. “User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free,” the person said.

Asked whether Binance had enough USDC to meet USDC withdrawal requests, the person added it may need to move funds to online “hot” digital wallets from offline wallets, convert stablecoins from one another or carry out network upgrades, sometimes causing delays.

Binance said in a tweet around 1654 GMT that USDC withdrawals had resumed.

Crypto news outlet CoinDesk reported earlier that Binance saw outflows of $902 million on Monday.

Binance is already under pressure from authorities. Splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation focused on Binance’s compliance with U.S. anti-money laundering laws and sanctions, Reuters reported on Monday.

The report sparked a drop of almost 4% in Binance’s BNB token, traders told Reuters.

‘TOKEN SWAP’

Earlier on Tuesday, Binance halted withdrawals of USDC, citing a “token swap” – where digital token holders exchange their crypto coins, typically over different blockchains.

“On USDC, we have seen an increase in withdrawals,” Binance’s Zhao tweeted at around 0820 GMT.

Binance said in September it would automatically convert user balances and new deposits of USD Coin and two other stablecoins into its own stablecoin, Binance USD.

Zhao said on Tuesday swapping USDC with two other tokens – Paxos Standard and Binance USD – requires using traditional dollars at a bank in New York. “The banks are not open for another few hours. We expect the situation will be restored when the banks open.”

USDC, issued by U.S.-based firm Circle, is the world’s second-biggest stablecoin. Dante Disparte, Circle’s chief strategy officer and head of global policy, said that there will be “challenges” relating to liquidity and redemptions when assets are swapped in the way Binance has done with USDC.

“The feature of liquid dollar digital currencies should be that they are redeemable on demand, and at par at all times, even during conditions of stress,” Disparte added.

For a weekly update on cryptocurrencies and digital assets sign up for Reuters Crypto Wire newsletter here.

(Reporting by Tom Wilson and Elizabeth Howcroft, Editing by Louise Heavens, Mark Potter and David Evans)

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Poor management, inexperienced leaders led to FTX collapse, new CEO tells lawmakers

By Hannah Lang

WASHINGTON (Reuters) – Shortly after U.S. regulators on Tuesday charged FTX founder Sam Bankman-Fried with defrauding investors, its new chief executive told lawmakers the crypto exchange’s implosion stemmed from poor management practices and inexperienced individuals at the helm.

“The FTX group’s collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced, non-sophisticated individuals,” said John Ray, who was named CEO of FTX after Bankman-Fried stepped down and the company filed for bankruptcy on Nov. 11.

Ray also said there was virtually no distinction between the operations of FTX and Alameda Research, Bankman-Fried’s crypto trading firm, which maintained close ties with his exchange.

“I’ve just never seen an utter lack of record keeping – absolutely no internal controls whatsoever,” Ray told the U.S. House of Representatives Financial Services Committee.

It will take weeks, perhaps months, to secure all the group’s assets, Ray said.

Bankman-Fried was arrested Monday evening in the Bahamas and was set to appear before a magistrate Tuesday. U.S. federal prosecutors on Tuesday alleged the he committed fraud and violated campaign finance laws, and FTX’s founder and former CEO also faces additional charges by U.S. regulators.

The Bahamas attorney general’s office said it expects Bankman-Fried will be extradited to the United States.

Ray said in his testimony that he had hired a new chief financial officer, a head of human resources and administration, and a head of information technology. He has also appointed a board of directors, which is chaired by former U.S. Attorney Joseph Farnan.

Since he took over as CEO, Ray said he has established that customer assets at FTX were commingled with those of Alameda Research. Client funds were used to engage in margin trading, which exposed customers to massive losses, he said.

Ray also addressed why FTX US was included in the bankruptcy filing. Bankman-Fried has expressed confusion about that in media interviews, claiming the company’s U.S. entity was financially sound.

But Ray said such a step was necessary to avoid a “run on the bank” and to allow FTX’s new leadership to identify and protect its assets.

Bankman-Fried had also been scheduled to appear before the committee on Tuesday, and his testimony had been highly anticipated.

“Unfortunately, the timing of his arrest denies the public the opportunity to get the answers they deserve,” said the panel’s chair, Democratic U.S. Representative Maxine Waters.

“Rest assured that this committee will not stop until we uncover the full truth behind the collapse of FTX just a few months ago.”

(Reporting by Hannah Lang, Doina Chiacu, Moira Warburton; Editing by Jonathan Oatis)

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FTX founder Bankman-Fried is ‘considering all of his legal options’ – attorney statement

(Reuters) – FTX founder Samuel Bankman-Fried is reviewing charges with his legal team and considering his options, his counsel said in a statement after U.S. authorities charged him on Tuesday.

“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” attorney Mark S. Cohen said in a statement emailed by Bankman-Fried’s spokesperson.

(Reporting by Chris Prentice; Editing by Mark Porter)

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Sam Bankman-Fried’s sudden turn from white knight to detainee

By Hannah Lang

(Reuters) – The sudden fall from grace and arrest of FTX’s former CEO Sam Bankman-Fried has stunned investors and crypto enthusiasts who once hailed the 30-year-old American as the savior of the industry.

Bankman-Fried was charged by the U.S. Securities and Exchange Commission (SEC) on Tuesday with defrauding investors in what regulators called “a house of cards,” hours before he was set to appear before a magistrate in the Bahamas.

The fallen crypto entrepreneur was arrested by Bahamian authorities late on Monday at the request of the U.S. government, U.S. Attorney Damian Williams said in a statement. The Bahamian attorney general said in a separate statement the United States was likely to request his extradition.

Bankman-Fried amassed billions of dollars in personal wealth running FTX, one of the world’s largest crypto exchanges that was valued earlier this year at $32 billion.

Since stepping down, Bankman-Fried has said he no longer has a role at the company. Yet he also told a Vox reporter he believed FTX’s bankruptcy filing was a mistake and has suggested on Twitter and in media interviews that he can still raise liquidity to repay customers. He did not specify how he planned to do so.

FTX appointed restructuring expert John Ray as CEO after Bankman-Fried stepped down on Nov. 11, shortly before filing for bankruptcy. Ray oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.

WILD HAIR, T-SHIRTS, CELEBRITY PALS

Known in financial circles by his initials, SBF, Bankman-Fried had become a prominent and unconventional figure known for his wild hair, t-shirts and shorts. He appeared on panels with celebrity politicians such as former U.S. President Bill Clinton and former British Prime Minister Tony Blair as well as with supermodel Gisele Bundchen.

Bankman-Fried contributed $5.2 million to President Joe Biden’s 2020 campaign and became one of the largest donors to Democratic political candidates.

“Nobody was saying that anything was wrong with SBF,” said Marius Ciubotariu, co-founder of the Hubble protocol, a decentralized lending platform.

The collapse of FTX caught markets by surprise because Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.

The one-time crypto wunderkind was raised in California by two Stanford University law professors, Joseph Bankman and Barbara Fried. Bankman-Fried started his career at Jane Street Capital, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.

FROM BILLIONS TO BANKRUPTCY

Taking advantage of the price differences in bitcoin in Asia and the United States, SBF amassed a fortune that Forbes estimated a year ago was as high as $26.5 billion. He eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion.

Reuters has reported that over the past two years, FTX, Bankman-Fried’s parents and FTX senior executives bought at least 19 properties worth nearly $121 million in the Bahamas, where FTX is based.

Since FTX filed for bankruptcy, Bankman-Fried has distanced himself from the image he projected in media interviews and on Capitol Hill, telling the Vox reporter his advocacy for a crypto regulatory framework was “just PR” and his discussions on ethics within the industry were at least partly a front.

As traders rushed to withdraw funds from FTX in the days before the company collapsed, Bankman-Fried told investors he was convinced the business would be rescued, according to a source familiar with the situation.

FTX’s meltdown sent bitcoin plunging to a two-year low as investors worried the company’s problems would spread to other crypto firms. Employees were blindsided; some sent apologetic notes to clients expressing shock at what had happened, according to a person familiar with the matter. Bankman-Fried himself has apologized multiple times to customers and employees.

For all his recent celebrity endorsements, notoriety and big-name backers, Bankman-Fried said he was not always confident about FTX’s prospects.

“I thought we would fail,” Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.”

(Reporting by Hannah Lang in Washington; additional reporting by Anirban Sen in New York; Editing by David Gregorio, Lincoln Feast and Mark Potter)

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Factbox-Highlights from SEC complaint against Sam Bankman-Fried

(Reuters) – Sam Bankman-Fried, the founder of collapsed crypto exchange FTX, was charged by the U.S. Securities and Exchange Commission (SEC) on Tuesday with defrauding investors in what regulators called “a house of cards.”

On Monday, Bankman-Fried was arrested in the Bahamas at the behest of U.S. prosecutors.

The SEC said Bankman-Fried carried out fraud when raising more than $1.8 billion from investors, and the regulator is seeking a court order for the former CEO to repay the cash it says he made from this fraud, and pay monetary penalties.

Bankman-Fried “spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments,” the SEC alleged.

His “brazen, multi-year scheme finally came to an end when FTX, Alameda (a hedge fund founded by Bankman-Fried), and their tangled web of affiliated entities filed for bankruptcy on November 11, 2022.”

Representatives for Bankman-Fried declined comment. Bankman-Fried has apologised to customers and acknowledged oversight failings at FTX, but said he doesn’t personally think he has any criminal liability.

Here are some of the highlights from the SEC’s complaint.

DIVERTING CUSTOMER FUNDS

The SEC’s filing said Bankman-Fried diverted billions of dollars of FTX customer funds into his hedge fund Alameda Research by directing FTX customers to deposit money into bank accounts controlled by Alameda and by enabling Alameda to draw from a “virtually limitless” line of credit funded by FTX customer assets.

The filing said Alameda used the funds for its own trading and also made loans to Bankman-Fried totalling more than $1.3 billion between March 2020 and September 2022, with which he made large political donations and purchased “tens of millions of dollars in Bahamian real estate for himself, his parents, and other FTX executives.”

“None of this was disclosed to FTX equity investors or to the platform’s trading customers,” the filing said, adding Bankman-Fried told investors and directed his employees to tell investors that Alameda had no preferential treatment from FTX.

FTX’S POOR CONTROLS AND RISK MANAGEMENT

The SEC said that while Bankman-Fried presented FTX to investors and the public as a “mature company that managed funds and risk in a conservative, rigorous manner,” in reality this was not the case.

It said Bankman-Fried’s statements that FTX had a sophisticated automatic mechanism to manage risk were false because he did not disclose that this system did not apply to Alameda.

In addition: “The collateral that Alameda had on deposit, consisting largely of enormous positions in illiquid crypto assets issued by FTX and Bankman-Fried (including the “FTT” token, the native crypto asset of FTX), compounded the undisclosed risk to FTX’s investors,” the SEC said, as this “was not worth the value assigned to it.”

The SEC also said the loans to Bankman-Fried and other members of FTX staff were “poorly documented, and at times not documented at all” and not disclosed to investors.

MISLEADING INVESTORS IN 2022

As crypto markets tumbled this summer, Bankman-Fried provided credit to and took over several failing crypto firms even though “he knew or was reckless in not knowing” that FTX itself was in a “precarious financial condition,” the SEC said.

It said that, while doing so, he “continued to present a false and misleading positive account of the company to investors.”

Later this year, after media reports about the state of Alameda’s balance sheet including by crypto news outlet CoinDesk, Bankman-Fried tweeted: “FTX is fine. Assets are fine … FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries). We have been processing all withdrawals, and will continue to be ….”

“That tweet was false and misleading,” the SEC said.

(Reporting by Alun John and Elizabeth Howcroft; Editing by Mark Potter)

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Brazil central bank to launch its digital currency in 2024

BRASILIA (Reuters) – Brazil’s central bank aims to launch its digital currency in 2024 after a closed pilot program next year with financial institutions, bank president Roberto Campos Neto said on Tuesday, adding that the project had received international attention.

Speaking at an event hosted by the news website Poder 360, Campos Neto said the design of the central bank’s digital currency would encourage banks to tokenize their assets, with considerable efficiency gains.

“If the digital currency is actually a tokenized deposit, it inherits all the regulation that already applies to deposits,” he said, adding that it should not disturb monetary policy or hurt banks’ balance sheets.

Campos Neto said representatives of the International Monetary Fund (IMF) have approached the central bank and given feedback that this model seems the easiest to implement and other central banks should look into it.

“In the end, we were even flattered to have thought of a system that other central banks are now thinking of,” he said.

The tokenization of deposits should also improve the banks’ settlement, auditing and funding costs, said Campos Neto.

The central bank chief also predicted a jump in use of the bank’s popular instant payment system, Pix, once users can access cheaper credit through the system, without a fee known as the merchant discount rate (MDR).

Merchants pay the MDR fee to the companies that supply card machines, such as Cielo, Stone and Getnet.

Launched in November 2020, Pix is ​​free for individuals, but the system lets banks and payment institutions freely define merchants’ costs both for transfers and receiving funds.

The Pix system has grown immensely popular in Brazil, with use now surpassing transactions with credit and debit cards in the country.

(Reporting by Marcela Ayres; Editing by Andrew Heavens and David Evans)

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Cyprus watchdog to extend FTX EU licence suspension

NICOSIA (Reuters) – Cyprus’s securities regulator plans to extend the suspension of the licence of FTX EU and will meet to discuss the matter next week, a spokesperson said on Tuesday.

“CySEC is taking all the necessary actions to safeguard the interests of investors of FTX EU and is working closely with the administrator in the U.S. under chapter 11,” the person said in a written comment to Reuters.

The Cypriot regulator suspended the licence of FTX EU on Nov. 11, just before the cryptocurrency exchange imploded, seeking bankruptcy protection in the United States.

FTX EU had then been given a month to rectify what CySEC suspected were violations of conditions to safeguard client assets and on the suitability of management.

Its former CEO Sam Bankman-Fried was charged by the U.S. Securities and Exchange Commission on Tuesday of defrauding investors, following his arrest by Bahamian authorities late on Monday.

FTX had announced in September that it had received approval to operate FTX EU as a Cyprus Investment Firm. CySEC has said it was not licensed to engage in the direct trading of crypto assets.

(Reporting by Michele Kambas Editing by Jason Neely and Mark Potter)

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CFTC to charge FTX ex-CEO with digital commodity asset fraud -source

WASHINGTON (Reuters) – The U.S. Commodity Futures Trading Commission will file charges on Tuesday against cryptocurrency exchange FTX founder Sam Bankman-Fried over alleged digital commodity asset fraud, a source familiar with the matter told Reuters.

(Reporting by Chris Prentice; Writing by Susan Heavey; Editing by Mark Porter)

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QUOTES- Bank of England’s Bailey speaks about tests for funds after recent upheaval

LONDON (Reuters) – Governor Andrew Bailey spoke to reporters after the Bank of England said investment funds and other non-bank financial institutions would face their first ‘stress test’ after the near-meltdown in the pension fund sector earlier this year.

Below are comments from Bailey at a news conference.

BAILEY ON RISKS POSED BY NON-BANKS

“I think it’s different now because … we’ve now got a whole series of non-bank incidents, if you like, across different jurisdictions, and I think it is absolutely critical first of all to recognise that this is a sector that is highly internationally diversified.”

BAILEY ON REGULATING NON-BANKS

“The FPC (Financial Policy Committee) obviously has to make choices over where it focuses on what is a very big landscape… In terms of following through, I’m not saying it necessarily requires a change to remit. I think it does require a change to focus… We have made a recommendation this time…and it goes to the area of defined-benefit pensions schemes and the pensions regulator. It is not saying we should change the perimeter but it is saying that I think we need more focus on what I call the financial aspects of regulation in that area.”

BAILEY ON KEEPING REGULATION UP TO DATE

“It’s not a matter of universal deregulation but rather getting regulations that suit our case. Post-financial crisis regulations have served an important purpose, the system is more robust, but the mere passage of time does not mean those regulations are no longer needed. Far from it. They should be kept relevant and amended as such but we should assume this time is different.”

BAILEY ON CRYPTO-CURRENCY RISKS FOR INVESTORS

“I’ve taken a pretty strong line on crypto…that it doesn’t have intrinsic value and that if people wish to invest in it, they must be prepared to lose their money.”

(Reporting by Sarah Young, Paul Sandle and Farouq Suleiman; editing by William Schomberg)

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Cryptoverse: Jump or slump? $30k or $5k? Play the bitcoin roulette

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – Plucky bitcoin’s been holding steady since seeing off the chaos of the FTX collapse, gathering its strength to rally towards the dizzy heights of $30,000 in 2023.

Battered bitcoin’s been unresponsive since being clobbered by the FTX collapse, taking in a deep ragged breath before plunging towards the depths of $5,000.

Place your bets, spin the wheel.

The world’s dominant cryptocurrency has certainly been uncharacteristically muted over the past two weeks, treading water between about $15,770 and $17,350 in the eerie wake of the FTX-induced market mini-crash in November.

What happens next is anyone’s guess.

“The question we need to be asking ourselves now is: Are there any sellers left in this market? To my mind, no, there aren’t that many left,” said Jacob Sansbury, co-founder of retail investor services firm Pluto.

Sansbury believes most over-leveraged miners, who tend to be large holders of bitcoin, have exited positions to pay off debts taken out in traditional money to fund their equipment and operations.

Indeed bitcoin’s recent calmness could be down to the fact that there are fewer coins to sell: the amount held on exchanges for trading stands at 1.97 million, Coinglass data shows, down steeply from 2.33 million at the start of the year.

Major offloading has already taken place; November saw a 7-day realized loss of $10.16 billion in bitcoin investments as investors were forced to exit long-term positions, the fourth-largest loss on record by this measure, according to Glassnode data.

The cryptocurrency has already dropped more than 60% in 2022 and set to see its first annual loss since 2018.

Many remaining investors are placing their bitcoin into offline “cold storage” according to on-chain data, which should strengthen a floor price around $16,000, said Bob Ras, co-founder of Sologenic, an exchange and digital asset firm.

“Barring any more surprises in the market, it’s hard to imagine BTC going significantly lower,” he added.

Ras believes that if it wasn’t for the high-profile collapse of crypto players FTX, Celsius and Terra this year, the price of bitcoin would be close to $25,000 now.

But this is crypto, and more surprises could well be in store, with a number of potential selling triggers on the horizon.

THE BEAR’S TALE

First potential peril is the risk of more bitcoin miners being forced to sell their holdings to stay afloat, as mining becomes increasingly expensive.

“Miners as a group start to become unprofitable under $20,000, so we’re below (that) point,” noted Ben McMillan, chief investment officer at IDX Digital Assets.

CrytpoQuant’s miner reserve indicator, which tracks the amount of bitcoin held in miners’ wallets, has dropped by about 7,722 bitcoin since November.

Market players also pointed to concerns about the Grayscale Bitcoin Trust, the world’s largest bitcoin fund with $10.9 billion in assets. Parent company Digital Currency Group, which owns Genesis Trading, owes $575 million to Genesis’ crypto lending arm, DCG’s CEO told shareholders on Nov. 22.

Grayscale Bitcoin Trust’s discount to its net asset value, is at an all-time low of 48% and shares have not traded at a premium since March 2021, Coinglass data showed.

DCG last month said troubles at Genesis’ lending business had no impact on DCG and its subsidiaries, while Grayscale maintained it was business as usual and its underlying assets were unaffected.

“This could be the other shoe to drop,” said McMillan, referring to the possibility of Grayscale running into financial trouble. “That said, if bitcoin can hold the $15,000 line through the DCG workout, that would be a strong indicator going into 2023.

A more hawkish than expected Federal Reserve at its final meeting of the year on Wednesday could further erode risk appetite and bitcoin’s prospects, crypto watchers said.

GETTING TECHNICAL

The scenarios of bitcoin leaping to $30,000 or tumbling to $5,000 in 2023 were long-shot possibilities flagged by VanEck and Standard Chartered, respectively.

When it comes to the technicals, several analysts pointed to indicators showing bitcoin may have found support between $16,000 and $16,800.

The cryptocurrency could also run into resistance around the $17,490 level, said Eddie Tofpik, head of technical analysis at ADM Investor Services, cautioning that any long-term rally was likely to be challenging.

“Anytime we see a rally, it’s one step up and then two or three steps down,” he said.

Vetle Lunde, analyst at Arcane Research, said long-term bets could be appealing in the wake of the November turmoil.

Nonetheless, uncertainty reigns.

“Bear in mind that massive drawdowns tend to be followed by a long-lasting directionless market filled with apathy and unfathomable second-guessing,” Lunde added.

(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)

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Former FTX CEO Bankman-Fried arrested in Bahamas after U.S. files charges

(Editor’s note: This story contains language in paragraph 18 that some readers may find offensive)

By Jasper Ward, Luc Cohen and Angus Berwick

(Reuters) – FTX founder Sam Bankman-Fried was arrested in the Bahamas at the behest of U.S. prosecutors on Monday, the day before he was due to testify before Congress about the abrupt failure last month of one of the world’s largest cryptocurrency exchanges.

The arrest marks a stunning fall from grace for the 30-year-old entrepreneur widely known by his initials SBF, who rode a boom in bitcoin and other digital assets to become a billionaire many times over until FTX’s rapid demise.

The exchange, launched in 2019 and based in the Bahamas, filed for bankruptcy Nov. 11 after it struggled to raise money to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours. Since then it emerged Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business.

The arrest came as Bankman-Fried prepared to lash out at his former lawyers at Sullivan and Cromwell, new FTX CEO John Ray and rival exchange operator Binance at a Congressional hearing.

In the testimony, a draft copy of which was seen by Reuters, Bankman-Fried planned to say he was pressured by Sullivan and Cromwell lawyers to nominate Ray as CEO following the sudden exodus of customer funds. And when within minutes he changed his mind, following an offer of billions of dollars of fresh funding, he was told it was too late.

Bankman-Fried will now be unable to testify, according to Congresswoman Maxine Waters, who said in a statement she was surprised to hear of his arrest. Ray’s testimony will go ahead.

Bankman-Fried was arrested shortly after 6:00 pm Monday (2300 GMT) at his apartment complex, a luxury gated community called the Albany, and will appear in a magistrate court on Tuesday, Bahamian police said. The Bahamas attorney general’s office said it expects he will be extradited to the United States.

A spokesman for the U.S. Attorney’s office in Manhattan confirmed Bankman-Fried had been arrested in the Bahamas but declined to comment on the charges.

U.S. prosecutors said they had a sealed indictment against Bankman-Fried and charges would be revealed on Tuesday. The New York Times reported he faces fraud and money laundering charges. The U.S. Securities and Exchange Commission separately authorized charges relating to Bankman-Fried’s violations of securities laws, the regulator said on Monday.

Bankman-Fried and his lawyer Mark Cohen did not immediately respond to requests for comment, nor did Sullivan and Cromwell, FTX, Ray and Binance.

Bankman-Fried has said he doesn’t think he has any criminal liability. “I didn’t ever try to commit fraud,” Bankman-Fried said in a Nov. 30 interview at the New York Times’ Dealbook Summit.

CRYPTO INDUSTRY REELING

FTX’s demise sent shockwaves through an already-battered cryptocurrency industry, which has seen a string of meltdowns this year that have taken down other key players including Voyager Digital and Celsius Network.

More trouble might be on the horizon for the industry. Reuters reported Monday that some Justice Department prosecutors believe they have gathered sufficient evidence in their long-running investigation of Binance to charge the world’s largest cryptocurrency exchange and some top executives.

A Binance spokesperson told Reuters for the article: “We don’t have any insight into the inner workings of the U.S. Justice Department, nor would it be appropriate for us to comment if we did.”

Bitcoin was steady at $17,150. It is down more than 60% this year.

MEA CULPA

Since the collapse of FTX, Bankman-Fried has given numerous media interviews apologizing for his mistakes and explaining what happened at the company, something that legal experts said could allow prosecutors to point to inconsistencies to undermine his credibility with a jury.

“The defense is going to be completely boxed in by the prior statements SBF has made and the very incisive questions he has answered in the press and on social media,” said criminal defense attorney and former federal prosecutor Renato Mariotti.

In his written testimony, Bankman-Fried repeated his mea culpa: “I would like to start by formally stating, under oath: I fucked up,” he wrote.

Then, he launched into an explanation of how things went badly at FTX and his hedge fund Alameda Research, while criticizing Sullivan and Cromwell and Ray as well as arch rival Binance for their actions as his firm imploded.

UNDER PRESSURE

Describing his decision to give up his role as CEO of FTX and appoint Ray, Bankman-Fried said he was pressured to do so by Sullivan and Cromwell and the general counsel of FTX’s U.S. unit, who he said was a former lawyer at the law firm.

Bankman-Fried said less than 10 minutes after he had signed a document at 4.30 am on Nov. 10 to make Ray the CEO of FTX, he received “a potential funding offer for billions of dollars.” Bankman-Fried said he told his counsel to rescind the CEO appointment a few minutes later but was told it was already too late to do so.

Bankman-Fried said he had since been cut off from FTX’s systems and Ray had not responded to his emails offering help or other information.

Bankman-Fried, who had become a prominent and unconventional figure known for his wild hair, t-shirts and shorts during crypto’s boom, said the fortunes of FTX and his trading firm Alameda declined rapidly this year as crypto currencies crashed amid rising interest rates.

In late 2021, he said Alameda had net asset value of more than $50 billion and manageable levels of debt. That became unsustainable as digital assets declined.

“Last year, my net worth was valued at $20b,” Bankman-Fried wrote. “Last I saw, I believe my bank account had about $100k in it.”

(Reporting by Jasper Ward in Washington, Luc Cohen and Jack Queen in New York, Brian Ellsworth in Miami and Angus Berwick in London; Editing by Megan Davies, Paritosh Bansal and Lincoln Feast)