Sam Bankman-Fried in Custody After Being Charged and Bail Denied; Will His Arrest Hurt Crypto Further?

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After the collapse of crypto exchange giant FTX, it was only a matter of time before its founder was detained. Sam Bankman-Fried was apprehended in his luxury Bahamas mansion a couple of days ago with bail denied. US prosecutors have accused the 30-year old billionaire for fraud and misappropriating billions of dollars after violating campaign laws. FTX is one of the biggest financial frauds in history, losing over $16 billion dollars in a single day.

The mastermind behind it, Bankman-Fried, was once thought of as the regular Joe millionaire. In the end, it was discovered that he syphoned money from the exchange to cover debts of another one of his brainchildren, Alameda Research, resulting in the liquidation of FTX.

A Defrauding Scheme

Dressed in a blue suit, the former FTX CEO appeared in court yesterday. He lowered his head and hugged his parents as we patiently awaited what the judge had to say. The judge explained that the risk of flight is too great, ordering Bankman-Fried to be detained in a Bahamas correctional facility until early February.

It was another stunning fall of grace for the crypto billionaire in the past few weeks. He promised that he’ll make things right on social media in a lengthy and mysterious series of tweets where he blamed it all on ‘bad financial advice’. There’s no excuse for FTX’s demise, though, especially with the role he played in all of it.

According to US prosecutors, Sam Bankman-Fried engaged in a scheme to defraud the exchange’s customers. He embezzled their deposits to pay for debts of his crypto hedge fund Alameda Research. The same money was also used to make investment in the same fund after providing misleading information about its condition and actions. To make thing worse, he tried to disguise all the money he’s earned by committing wire fraud.

The stolen money was used to make tens of millions in campaign contributions. Bankman-Fried launched FTX in 2019 and was one of the largest contributors to president Joe Biden’s campaign. His projected net worth was over $25 billion, but as it turns out, he got that money by stealing it from his customers.

What’s Next for Bitcoin?

It’s no wonder that FTX’s demise severely hurt Bitcoin’s price. The biggest cryptocurrency by market value dragged altcoins to the mud before climbing back to almost $18,000. It has yet to pass that price bar, but it’s doing much better than the past few weeks.

Bankman-Fried’s arrest and fraud charges are not good news for crypto. It once again paints the wrong picture, giving crypto negators the fuel they need to bash crypto further. Financial organizations that have denounced Bitcoin are in the same position, so FTX’s liquidation has a much bigger much bigger impact that simply messing up crypto prices.

It remains to be seen what the prosecution has in store for Bankman-Fried. Until it’s all over, we think Bitcoin’s price won’t improve, and that might take a while.