FTX cryptocurrency exchange founder arrested in Bahamas

The police of the Bahamas have arrested Sam Bankman-Fried, the founder and former director of the now-bankrupt FTX cryptocurrency exchange, the country's attorney general said.

As the BBC informs, Bankman-Fried will appear before the court in Nassau, the capital of the Bahamas, on Tuesday.

Police said he was arrested for "financial offenses" against the laws of the United States and the Bahamas.

Last month, FTX filed for bankruptcy in the US, as a result of which many users were unable to withdraw their funds from this cryptocurrency exchange. According to a court filing last month, FTX owes its 50 largest creditors nearly $3.1 billion.

It's not yet clear how many of the people who have money in this cryptocurrency exchange will get their money back at the end of the bankruptcy process, though many experts have warned that it could be a small fraction of their money.

How did FTX go bankrupt?

FTX, once valued at $32 billion, went bankrupt in just a few days. First, rival cryptocurrency exchange Binance announced that FTX was running scams with some tokens. After that, FTX customers began to massively withdraw their funds from this cryptocurrency exchange, which caused the latter to have a liquidity problem. After that, Binance terminated the non-binding agreement to buy FTX. On November 11, the FTX cryptocurrency exchange declared bankruptcy, and Sam Bankman-Fried resigned from the position of its director.

Before FTX's bankruptcy, 30-year-old Bankman-Fried's fortune was estimated at $15.6 billion. His share in FTX was 53%, which was worth $6.2 billion before the problems started, and his company Alameda Research was providing another $7.4 billion. However, the collapse of FTX caused both assets to depreciate and are now valued at just $1. Already on November 11, Bankman-Fried's wealth had decreased to $991.5 million; that is, by almost 94% in just one day.

The US Securities and Exchange Commission and the Department of Justice are currently investigating the FTX bankruptcy case.

The story of FTX has drawn the attention of regulators around the world to the cryptocurrency market. Although this market has been around for quite some time, most countries still do not have laws regulating this market. But the FTX’s bankruptcy, which affected millions of investors and caused billions of dollars in losses, forces a change in the approach to the regulation of this sector.