SBF and FTX face criminal investigation: Here’s what has happened so far

While no charges have been filed and no one’s been arrested, the US is looking to extradite SBF.

Bankman-Fried’s empire crumbled last week after a liquidity crunch at one of its affiliates. (Credit: Bloomberg)

FTX, the second-largest crypto exchange in the world, collapsed last week with investors looking at billion of dollars in losses. According to reports, FTX founder Sam Bankman-Fried (SBF) allegedly used billions of dollars from customer money for his trading company Alameda Research. According to reports, SBF will likely face criminal charges and the office of the Manhattan US attorney is preparing these against him and his company. Here’s a look at what has happened so far in this latest crypto meltdown.

US SEC, Justice Department investigating

The US Justice Department and Securities and Exchange Commission (SEC) had already been investigating the cryptocurrency exchange before its collapse, according to the Wall Street Journal. The investigation was focused on the exchange’s US branch. Bloomberg reports that the SEC is scrutinising SBF’s moves that pushed FTX into bankruptcy. With the crisis deepening, the securities regulator for the Bahamas announced that it was freezing FTX’s assets and appointing a new provisional liquidator.

SBF to be extradited

While no charges have been filed and no one’s been arrested, the US is looking to extradite SBF. American and Bahamian authorities are reportedly in talks to bring SBF to the US for questioning, with the talks between the officials of the two countries intensifying lately. The Bahamian authorities have also stated that SBF has been cooperating with them.

House panel meeting on FTX collapse

The US House of Representative Financial Services Committee announced on Wednesday that it is set to hold a hearing about the bankruptcy filing of FTX in December. The hearing will investigate how the cryptocurrency exchange collapsed, along with the ramification of its filing for bankruptcy. The wider ecosystem surrounding cryptocurrency will also be looked into, with the chairwoman of the committee, Rep Maxine Waters, stating that legislative action is needed to better manage digital assets. The committee also plans on hearing from Sam Bankman-Fried, individuals from his trading firm Alameda Research, and from Binance.

FTX has a new CEO

John Ray was appointed as FTX’s new CEO following the company’s filing for bankruptcy on November 11. In a court filing, he describes major lapses in oversight and untrustworthy records, saying that they were the worst he’s ever seen in his 40 years career as a bankruptcy specialist.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said in the filing with the District of Delaware bankruptcy court, according to an Associated Press report.

Ray’s filing also highlighted that an Alameda entity had lent $2.3 billion to an FTX entity, while the FTX top brass had collectively borrowed $1.6 billion from Alameda. There were more such transactions. FTX funds were also used to buy homes and other items for employees and advisors. But it was the $10 billion that FTX lent in loans to Alameda from customer deposits that perhaps delivered the final blow to the exchange. FTX had $16 billion in customer assets before the collapse.