Bahamian jail for SBF? - Future Of Investing

It should be interesting to see if it’s easier to refuse a subpoena from US Congress while incarcerated.

The attorney-general of the Bahamas announced late Monday that the country’s royal police force has arrested Sam Bankman-Fried. The US attorney for the Southern District of New York has filed an indictment against him, and the office says it will unseal the indictment Tuesday morning:

USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.

— US Attorney SDNY (@SDNYnews) December 12, 2022

From the Bahamian press release:

SBF’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition.

As a result of the notification received and the material provided therewith, it was deemed appropriate for the attorney-general to seek SBF’s arrest and hold him in custody pursuant to our nation’s Extradition Act.

At such time as a formal request for extradition is made, The Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States.

Responding to SBF’s arrest, Prime Minister Davis stated, “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. While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued co-operation of its law enforcement and regulatory partners in the United States and elsewhere.”

The details of where he’s being held weren’t released, so it isn’t clear if he’s holed up in the penthouse, in a jail somewhere, or at a safe house somewhere hiding from Twitter personalities.

But it’s possible the arrest could help explain this:

Sam Bankman-Fried “has declined in an unprecedented abdication of accountability” to provide testimony before the Senate Banking Committee, Sens. Sherrod Brown and Pat Toomey say, adding Bankman-Fried’s “counsel has stated they are unwilling to accept service of a subpoena.”

— David Gura (@davidgura) December 12, 2022

John Ray, who was appointed CEO of FTX for the restructuring, will testify to the House Financial Services Committee tomorrow morning. His statement, out this evening, cuts through some of the hype from SBF’s various attempts to talk himself out of trouble.

First the question of FTX US. Bankman-Fried has said multiple times that FTX US was fine, and would have been had it not filed for bankruptcy. But it “was not operated independently of FTX.com”, says Ray:

Questions have been raised as to why all of the FTX Group companies were included in the Chapter 11 filing, particularly FTX US. The answer is because FTX US was not operated independently of FTX.com. Chapter 11 protection was necessary both to avoid a “run on the bank” at FTX US and to allow our team the time to identify and protect its assets. Since the time of the filing, I have become even more confident this was the correct decision, as the books and records issues at FTX US and the many relationships between FTX US and the other FTX Group companies become clearer.

He continues:

First, customer assets from FTX.com were commingled with assets from the Alameda trading platform.

Second, Alameda used client funds to engage in margin trading which exposed customer funds to massive losses.

Third, the FTX Group went on a spending binge in late 2021 through 2022, during which approximately $5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them.