The arrest marks a stunning fall from grace for the 30-year-old entrepreneur who rode a boom in bitcoin and other digital assets to become a billionaire many times over until FTX's rapid demise.

The exchange, launched in 2019 and based in the Bahamas, filed for bankruptcy Nov. 11 after it struggled to raise money to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours.

The arrest came as Bankman-Fried prepared to lash out at his former lawyers at Sullivan and Cromwell, new FTX CEO John Ray and rival exchange operator Binance at a Congressional hearing.

In the testimony, a draft copy of which was seen by Reuters, Bankman-Fried planned to say he was pressured by Sullivan and Cromwell lawyers to nominate Ray as CEO following the sudden exodus of customer funds. And when within minutes he changed his mind, following an offer of billions of dollars of fresh funding, he was told it was too late.

It is unclear, however, whether Bankman-Fried will get to testify. U.S. prosecutors in Manhattan said they had a sealed indictment against Bankman-Fried and charges would be revealed on Tuesday. The New York Times reported Bankman-Fried faces charges fraud and money laundering charges.

"I'm sorry," Bankman-Fried wrote in the draft testimony.

Bankman-Fried and his lawyer Mark Cohen did not immediately respond to requests for comment, nor did Sullivan and Cromwell, FTX, Ray and Binance.

ARREST IN THE BAHAMAS

The attorney general's office for the Bahamas said it proceeded with the arrest after receiving formal confirmation of charges against Bankman-Fried, adding it expects he will be extradited to the United States.

A statement from the Bahamas Police said Bankman-Fried had been arrested shortly after 6:00 pm Monday (2300 GMT) at his apartment complex, located in Albany, in the Bahamian capital of Nassau.

"He was arrested reference to various Financial Offences against laws of the United States, which are also offences against laws of the Commonwealth of The Bahamas," the statement said, adding he was taken into custody without incident and will appear in Nassau's Magistrate Court on Tuesday.

A spokesman for the U.S. Attorney's office in Manhattan confirmed Bankman-Fried had been arrested but declined to comment on the charges.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the United States Attorney’s Office for the Southern District of New York," United States prosecutor Damian Williams said in a statement. "We expect to move to unseal the indictment in the morning and will have more to say at that time."

The U.S. Securities and Exchange Commission separately authorized charges relating to Bankman-Fried's violations of securities laws, the regulator said on Monday.

CRYPTO TARGETS

Bankman-Fried's indictment by U.S. authorities comes as the Department of Justice is considering charges against a far bigger player in the crypto world, industry-leading exchange Binance.

Reuters reported Monday that some Justice Department prosecutors believe they have gathered sufficient evidence in their long-running investigation of Binance to charge the company and some top executives.

Binance is under investigation for possible money-laundering and sanctions violations, Reuters has reported. Others in the department have argued for taking time to review more evidence, four people familiar with the matter told Reuters.

MOVING MONEY

FTX's liquidity crunch came after Bankman-Fried secretly moved $10 billion of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter. At least $1 billion in customer funds had vanished, the people said.

Bankman-Fried told Reuters the company did not "secretly transfer" but rather misread its "confusing internal labeling." Asked about the missing funds, he responded: "???"

In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged risk management failures but sought to distance himself from accusations of fraud, saying he never knowingly commingled customer funds on FTX with funds at Alameda.

Bankman-Fried resigned as FTX's chief executive officer the same day as the bankruptcy filing.

U.S. crypto investors sued Bankman-Fried, alleging he and a slew of celebrities who promoted FTX engaged in deceptive practices, leaving the investors with $11 billion in damages.

FTX's demise marked the latest turmoil for the cryptocurrency industry this year. The overall crypto market has slumped amid a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network.

Cryptocurrency markets are still reeling from the collapse of FTX, but had no discernable reaction to Bankman-Fried's arrest. Bitcoin was steady at $17,150. It is down more than 60% this year.