Defiant founder and author Camila Russo explains the circumstances leading to FTX founder and former CEO Sam Bankman-Fried's arrest in the Bahamas on the eve of his planned testimony before the House Financial Services Committee, and whether there will be larger consequences for the crypto industry. Bankman-Fried has been charged by the SEC with defrauding investors for $1.8 billion.

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FTX Founder Sam Bankman-Fried Arrested, Charged with Defrauding Investors

just hours before the House Financial Services Committee is meeting to talk about Sam Bank man freed. News broke just a little bit ago that the F. T. X. Founder has been arrested in the Bahamas and charged with fraud. So here to break down everything we know in this developing story is the defiant founder and author Camilo russo Camila. Thank you so very much for joining us this morning. So I do want to get to the developing stuff that happened just a little bit ago. Sam Beckman freed has now been charged with defrauding FDx investors by diverting funds to Alameda Research, calling it a years long fraud. That's what prosecutors are saying here. So was this expected? It seems like this is developing and changing a lot by the hour. Yeah, that's right. So um Sam Beckman freed. The disgraced founder of F. T. X. Was actually arrested yesterday in the Bahamas where he lives. Um after prosecutors from the Southern district of New york filed criminal charges. But separately, the sec had also been investigated investigating him and actually disclosed their charges before the Southern district of New york is expected to Unseal um their charges this morning. And so um what the sec has charged him with is defrauding ft excess equity investors. So SPF has raised $1.8 billion dollars from equity investors and the sec is saying um sandbagged unfree presented um F. De X. As a reputable safe exchange for cryptocurrencies when in fact it was diverting customer funds to um to fund his hedge fund Alameda research. So this is obviously a huge uh breach of trust and um and and that's what the sec is charging him for. We're still expecting to see what charges the southern district of new york will bring. Um but the new york times has already reported citing people familiar with the matter that those charges include wire fraud, conspiracy, securities fraud and money laundering. So that's what we're expecting later today. I want to circle back to those charges in a minute. But of course following his arrest, bank been freed. Isn't expected to testify before the house any longer. So how will that limit the impact and scope of this hearing? Yeah. So he won't be testifying. He has just been charged. Um and it will, I mean he was obviously the main event of the hearing. Lawmakers were were expected to question him on all his dealings on on F. D. X. And and Alameda research. And that won't be happening anymore. So we'll have to wait and and see how and wait to see how this legal case develops. Now let's talk about those charges again as Ceo is banking free ultimately responsible for all of this alleged fraud. And you know ultimately then restitution for investors to of course. Uh So SPF has gone on this media tour the past couple of weeks trying to position himself as somebody who didn't really know what was going on in his own company. He he was trying to talk it all up to negligence rather than fraud. It looks like that was his legal strategy. But um, I think few people believe that that can actually hold up in court in in the end, he was the founder, he was the owner and the Ceo of F. T. X. And Alameda Research and so he was ultimately responsible for what was happening in his companies. In the end, this was a $10 billion hole in FDX in the exchange. That's the amount of money that was being funneled to Alameda Research. So, I think most people will find it very hard to believe that, you know, the Ceo had no idea that this was happening when you go through the charges from sec chair Garrett Gansler. It it's interesting because he says, we allege that bank man Fareed built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto. I mean, F. T. X was a major, major company. Do you think F. T. X. Is an extreme outlier? Or could this suggest more legal consequences for the larger crypto industry here? Well, I think both, I think he was an extreme outlier. Um, I find it very hard to imagine others were in crypto, we're dealing with this level of fraud and and you know what is saying here is also at the same time, all other centralized crypto trading venues need to comply with existing securities laws. So even if if stand back when freed and F. T. X were outliers, that doesn't mean that there will be more regulatory scrutiny on on the rest of crypto. Um, as there should be, I think, you know, this has proven that that centralized crypto exchanges need more transparency and need more accountability as we we cover daily on the defiant on on the news, A company that that I run um centralized crypto is in in need of uh of higher standards really, um that that really reflect the transparency that that this technology is supposed to bring. You know, crypto is supposed to be more open and more transparent and the underlying Blockchain actually is. But then, ironically, the exchanges where you trade crypto are these opaque venues. So I think this is what's what's coming up later for, you know, following this for a larger group to industry. Yeah. And it just seems like it's evolving and changing so much by the hour, Camilla. Such a pleasure to have you here, Camilla russo for breaking that down for us. And of course, cheddar news will be continuing to cover this story