To no one's surprise, Sam Bankman-Fried, founder of the collapsed crypto catastrophe FTX, has been arrested in the Bahamas in connection with "financial crimes" allegedly committed in the Bahamas and the United States.

The Bahamas Attorney General's Office said in a statement (opens in new tab) that Mr. Bankman-Fried is being held "under our country's extradition laws" and that the Bahamas will act "promptly" once a formal request for his extradition to the United States is made.

The FTX cryptocurrency exchange was valued at $32 billion (open in new tab) at the beginning of 2022, but by November it was completely out of gear; rumors of FTX's troubles, including $6 billion in funding, allegations of serious fraud, and ultimately, the man responsible for overseeing FTX's bankruptcy led to a collapse that John Ray III, who was in charge of overseeing FTX's bankruptcy, called the most "complete failure of corporate control" he had ever seen.

Questions about the role Bankman-Fried and other executives played in FTX's swift, lax, and potentially illegal handling of investor funds arose shortly after the company's problems came to light. In a lengthy Twitter thread, Bankman-Fried admitted that he "screwed up and should have done better," but has repeatedly denied that he knowingly participated in fraud or any other criminal activity.

More recently, however, it has at least become clear that oversight at the firm was severely lacking: both records and funds were lost, and Ray, who handled the FTX bankruptcy, has stated that Bankman-Fried "often used applications that were set up to be automatically deleted after a short period of communications and encouraged employees to do the same," he said. In the world of corporate governance, this is a very, very bad sign.

The U.S. Securities and Exchange Commission seems convinced that Bankman Fried was up to no good. Today, the day after his arrest, the SEC formally charged him with fraud and said that other securities law violations may occur.

"FTX was operating under the veneer of legitimacy created by Mr. Bankman-Fried by promoting, among other things, its best-in-class controls, including its proprietary 'risk engine,' and FTX's adherence to certain investor protection principles and detailed terms and conditions," said SEC Enforcement Director Gurbir S. Grewal said in a statement (open in new tab). But as we allege in our complaint, that veneer was not only thin, it was fraudulent."

"The collapse of FTX highlights the very real risks that unregistered crypto asset trading platforms can pose to investors and customers. While we continue to investigate FTX and other entities and individuals for possible violations of the federal securities laws alleged in the complaint, today we hold Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from FTX investors and misusing the funds of FTX's trading customers."

SEC Chairman Gary Gensler said Bankman-Fried "built a house of cards on a foundation of deception" and that the FTX collapse "is a clear call that crypto platforms need to comply with our laws."

The SEC complaint may be Bankman Fried's biggest problem, but it is not the only one. The U.S. Attorney's Office for the Southern District of New York and the Commodity Futures Trading Commission have also filed charges against him, and Bahamian Prime Minister Philip Davis said he would "continue his own regulatory and criminal investigation into the FTX collapse."

It may be some time before the matter is resolved; according to Coindesk (opens in new tab), Bankman Fried said at a court hearing following his arrest that he would not waive his right to challenge extradition to the United States.

The collapse of FTX, along with all the investor cash lost, also contributed to bitcoin miners defaulting on their loans (open in new tab) and leaving crypto companies like NYDIG, their funders, with a bunch of mining rigs that have lost significant value since their purchase. Maybe they should have used them to play Hunt: Showdown or Midnight Sands like the rest of us.