Ex-Crypto CEO Arrested on the Eve of Congressional Hearing

Ex-Crypto CEO Arrested on the Eve of Congressional Hearing

Legal Sidebari

Ex-Crypto CEO Arrested on the Eve of
Congressional Hearing
December 21, 2022
Introduction
Samuel Bankman-Fried, the former chief executive of FTX, a global cryptocurrency exchange, was
arrested by Bahamian authorities under an extradition warrant on the eve of his scheduled testimony
before the House Financial Services Committee. A federal grand jury indictment in the Southern District
of New York triggered his arrest. The indictment charges him with campaign finance offenses, money
laundering, wire fraud, and conspiracy, including conspiracy to commit commodities and securities fraud.
The wire fraud and money laundering offenses are punishable by imprisonment for not more than 20
years and the campaign finance, commodities, and securities offenses by imprisonment for not more than
five years. The indictment also suggests the possibility of the confiscation of cash and other real and
personal property related to the offenses. The Securities and Exchange Commission and the Commodity
Futures Trading Commission have each begun civil proceedings. FTX and its related entities are the
subject of bankruptcy proceedings.
Allegations
The indictment, accompanying press release, congressional testimony, and media accounts together
suggest that Bankman-Fried and others in FTX management employed a cavalier, self-serving
management style akin to embezzlement. The indictment asserts that Bankman-Fried and unnamed
confederates schemed to defraud FTX customers and lenders in order to engage in speculation and to pay
for the expenses and debts of a proprietary crypto hedge fund in violation of federal wire fraud, money
laundering, and conspiracy statutes.
Other counts in the indictment charge conspiracy to commit commodities fraud and securities fraud based
on misleading and materially false statements to customers and investors. The conspirators’ alleged
engagement in deceptive financial transactions supports the indictment’s money laundering count. The
general conspiracy count encompasses plots to impair the functioning of a federal agency, such as the
Federal Election Commission, by deceitful or dishonest means. This ensnarled the conspirators, who
allegedly used straw men and other deceptive practices in an effort to evade limits on campaign
contributions and corporate contributions in violation of federal campaign finance laws. Contributions
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reportedly went principally to Democratic campaign funds, although some appear to have flowed to
Republican beneficiaries as well.
Defendants must surrender for confiscation property derived from or traceable to these offenses. The
government may distribute confiscated property to the victims of the offense.
Extradition
Authorities in the Bahamas arrested Bankman-Fried in response to an extradition treaty request from the
United States. His situation is governed by the treaty and local law. He is free to waive undergoing formal
extradition proceedings before being surrendered to the United States. Thus far, he has not. His request
for bail has been denied, and he is being held in prison in the Bahamas. Should he waive extradition he
would be entitled to petition for pretrial bail upon his return to the United States.
The extradition treaty in place features a dual criminality requirement that calls for the surrender of any
fugitive charged with a serious crime punishable under the laws of each country. Like most recently
negotiated extradition treaties, the agreement contains provisions designed to eliminate the dual
criminality obstacles raised by the jurisdictional elements in federal crimes. Bankman-Fried is not a
citizen of the Bahamas, but his citizenship would be no bar to extradition if he were. Extradition
proceedings can take years to complete.
Had Bankman-Fried chosen to appear in person to testify before the House committee, he could have
been arrested under the indictment without the need for an extradition request. Consequently, he would
likely only have agreed to testify remotely. Bankman-Fried’s incarceration complicates any efforts to
secure even his remote appearance in subsequent criminal, administrative, or bankruptcy proceedings.
Such efforts necessarily involve approval of a foreign nation to permit U.S. proceedings that occur in part
within its territory and under procedures rendering the secured testimony admissible in U.S. proceedings.
(For further discussion, see CRS Report 94-166, Extraterritorial Application of American Criminal Law.)
Congressional Options
Although extradition is largely a matter of treaty, it is attended by a statutory framework within the
control of Congress. Congress may wish to consider legislation requiring an adjustment when the Justice
Department plans to request an arrest for extradition purposes of a witness scheduled to appear before a
congressional committee. The issues raised by the indictment might also prompt congressional
examination more generally of laws governing cryptocurrency that relate to securities regulation,
commodities trading, and bankruptcy but are unrelated to extradition. These topics are described in other
CRS products, including CRS Report R46208, Digital Assets and SEC Regulation; CRS Insight IN12047,
What Happened at FTX and What Does It Mean for Crypto?; and CRS Legal Sidebar LSB10832, Crypto
Assets and Property of the Bankruptcy Estate: An Analysis.

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Author Information

Charles Doyle

Senior Specialist in American Public Law

Disclaimer
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