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FTX Founder Sam Bankman-Fried Arrested In Bahamas At Request Of U.S. Officials

Former FTX CEO Sam Bankman-Fried has been arrested in the Bahamas just hours before he was due to testify before the House Financial Services Committee.

Updated at 7:40 pm EST

Sam Bankman-Fried, the former CEO of collapsed cryptocurrency trading platform FTX, has been arrested in the Bahamas, the U.S. District Attorney's office for the Southern District of New York said Monday.

Bankman-Fried, who was planning to appear via video link before the House Financial Services Committee tomorrow in Washington, was taken into custody by Bahamian police at the request of U.S. law enforcement officials under a seal indictment.

"As a result of the notification received and the material provided therewith, it was deemed appropriate for the Attorney General to seek (Bankman-Fried's) arrest and hold him in custody pursuant to our nation’s Extradition Act," the office of The Bahamas Attorney General Ryan Pinder said in a statement.

"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 to the United States," the statement added.

House Financial Services Committee Chair Maxine Waters had called on Bankman-Fried to testify as part of a Tuesday hearing aimed at investigating the FTX collapse, noting in a December 2 Tweet that "we appreciate that you've been candid in your discussions about what happened at FTX. your willingness to talk to the public will help the company's customers, investors, and others."

Bankman-Fried agreed to appear, but missed a deadline to reply to a similar request sent shortly after by Senate Banking Committee co-chairs Sherrod Brown and Pat Toomey.

FTX, at one time the second largest crypto platform in the worlds with a market value of around $32 billion, filed for Chapter 11 bankruptcy protection in early November amid a liquidity crisis that multiple media reports have suggested was linked to the use of customer deposits to back risky trades made by the group's wholly-owned hedge fund known as Alameda Research.

John Ray, a corporate restructuring expert brought in to manage FTX's bankruptcy proceedings, said that a small group of inexperienced, unsophisticated and potentially compromised individuals" was key to the group's ultimate failure. Ray said FTX did not keep complete books and records, had inappropriate cash governance and failed to institute basic security controls.

"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 wrote in a petition to the Delaware Bankruptcy Court on November 17.

Ray, who has also oversaw creditor recoveries in the Enron scandal, took Bankman-Fried to task for his increasingly vocal presence in mainstream and social media, saying the 30-year old "continues to make erratic and misleading public statements".