Industry News Sam Bankman-Fried Arrested of FTX is Under Arrest in the Bahamas

Sam Bankman-Fried Arrested of FTX is Under Arrest in the Bahamas

December 13, 2022

The plot behind the downfall of the second-biggest digital currency exchange in the US is only becoming more convoluted and more dangerous for the cryptosphere. Sam Bankman-Fried Arrested, the CEO and founder of the exchange has been arrested at his home in the Bahamas. The arrest comes on the order of the US authorities who requested extradition from the government of the small Caribbean nation. The government of the Bahamas is clearly ready to fulfill its obligation and get the same US national back to his home shores. The Royal Bahamas Police Force released a statement that global news media outlets quickly disseminated, stating that Sam Bankman-Fried is in their custody. Furthermore, they are clearly in direct communication with the US mainland. 

His country originally filed criminal charges against the young crypto founder. Now, the Royal Bahamas Police Force will likely use the Extradition Act which obliges them to send Sam Bankman-Fried back to the US. So far, it appears that the official request has not come in yet, but it seems that the same document is incoming in a matter of days, if not hours. The rest of the crypto community is eying the same proceedings with trepidation and a high degree of worry. While this is just the latest crash inside of the FTX story, it still has more than enough power to push the crypto prices further down. For weeks many crypto analysts have been expecting just this to happen. 

The FTX Story 

The downfall of the FTX exchange has not occurred overnight. This US cryptocurrency exchange used to offer a wide range of products, including futures, spot, and leveraged tokens. The exchange was founded in 2019 by Sam Bankman-Fried, who is also the CEO of the company, presently in bankruptcy proceedings. FTX used to offer trading on a variety of cryptocurrencies, including bitcoin, ethereum, and litecoin, but many other digital currencies as well. 

Its sales pitch was also based on its advanced trading features and user-friendly interface but hid the very damaging truth about its flimsy finances. The same truth came to light once the disruption of the finances came about a couple of months ago. Through the collapse of his exchange, Sam Bankman-Fried stated that the failure came through negligence, not any criminal intent. Now, with his arrest, the US authorities clearly have some questions about that assertion. 

Problem of Regulation

Bankman-Fried and others like him believe that the core issue that the FTX faced is the problem of US regulation of the crypto domain. That goes in particular for the regulatory framework in which cryptocurrency exchanges regularly operate, and where anyone from esports players to everyday users turns their fiat into crypto and vice versa. The level of regulation for digital currency exchanges in the United States varies depending on the state and jurisdiction in which the exchange operates. In general, however, the regulation of digital currency exchanges in the United States is relatively high compared to other countries. 

The US has a number of agencies and organizations that oversee the regulation of digital currencies and exchanges, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN). These agencies are responsible for enforcing a range of regulations that are designed to protect consumers and prevent financial crimes, such as money laundering and fraud. Now, they are acting against the chief of FTX, but the question is how could have they reacted more prudently and stopped the same collapse?

SEC Role

As the case against the CEO and founder of FTX intensifies, many are asking what can the SEC do to block any further similar collapses. The SEC’s primary focus is to protect investors and maintain the integrity of the financial markets. One way that the SEC helps cryptocurrency users is by providing information and resources on its websites, such as investor alerts and educational materials. The SEC also maintains a whistleblower program, which allows individuals to report potential violations of securities laws, including those involving cryptocurrencies. 

Additionally, the SEC enforces federal securities laws and regulations, including those that pertain to the trading of cryptocurrencies. This helps to ensure that cryptocurrency markets are fair and transparent and that investors are protected from fraudulent and manipulative practices. Here, the present case against Bankman-Fried is likely being built. Overall, the SEC plays a crucial role in regulating the cryptocurrency industry and protecting investors in the United States, but still clearly has a range of blind spots where things can go drastically wrong as they did for the FTX customers.

More Tailwind for the Crypto Winter

The new chapter in the FTX demise only adds more fuel to the ongoing crypto winter. Like all previous cryptocurrency winters, this particular downturn is characterized by a significant decline in the prices of tokens, as well as a decrease in trading volume and market activity. Analysts will quickly point out that any crypto winter can be caused by a variety of factors, including regulatory uncertainty, security breaches, and market manipulation. It can also be the result of broader economic conditions, such as a downturn in the stock market or a decrease in investor confidence – 2022 was full of those, including the war in Ukraine and the global recession. 

Today, it is clear that the ongoing crypto winter can and will have a significant impact on the cryptocurrency industry, as it can lead to the closure of businesses and the laying off of employees. It can also cause investors to lose significant amounts of money, which already took place with the massive slide in the value of the BTC token and all other digital currencies. However, some people in the industry view crypto winter as a necessary correction in the market and believe that it can ultimately lead to the growth and development of the same field. Anyone who believes that is in luck, as the arrest in the Bahamas will undoubtedly bring about further crypto market misery. With it, the crypto winter only looms longer and larger.

Source: Coindesk