Bankman-Fried, who was arrested in the Bahamas on Monday, lowered his head and hugged his parents after the magistrate judge refused bail citing a "great" risk of flight.
The US government has charged Samuel Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX, with a host of financial crimes, alleging he intentionally deceived customers and investors to enrich himself and others, while playing a central role in the company's multibillion-dollar collapse.
Federal prosecutors said on Tuesday that Bankman-Fried devised "a scheme and artifice to defraud" FTX's customers and investors beginning in 2019, the year it was founded.
He illegally diverted their money to cover expenses, debts and risky trades at the crypto hedge fund he started in 2017, Alameda Research, and to make lavish real estate purchases and large political donations, prosecutors said in a 13-page indictment.
The 30-year-old founder of the FTX platform was arrested in the Bahamas at the request of the US and faces a raft of accusations.
At a press conference on Tuesday, US Attorney Damian Williams in New York called it "one of the biggest frauds in American history" and said the investigation is ongoing and fast-moving.
FTX filed for bankruptcy on November 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
A lawyer for Bankman-Fried, Mark S. Cohen, said on Tuesday he is "reviewing the charges with his legal team and considering all of his legal options."
READ MORE: Former FTX CEO Sam Bankman-Fried arrested in the Bahamas
FTX Bankruptcy CEO (JOHN RAY III) just testified there was "no distinction" between FTX and Alameda Research in terms of governance.
— Coffeezilla (@coffeebreak_YT) December 13, 2022
'Few rules on funds use'
At a congressional hearing on Tuesday before Bankman-Fried's arrest, the new CEO brought in to steer FTX through its bankruptcy proceedings levelled harsh criticism.
He said there was scant oversight of customers' money and "very few rules" about how their funds could be used.
John Ray III told members of the House Financial Services Committee that the collapse of FTX, resulting in the loss of more than $7 billion, was the culmination of months, or even years, of bad decisions and poor financial controls.
"This is not something that happened overnight or in a context of a week," he said.
He added: "This is just plain, old-fashioned embezzlement, taking money from others and using it for your own purposes."
Bankman-Fried was denied bail at a court hearing in the Bahamas on Tuesday after prosecutors argued he was a flight risk, according to Our News, a broadcast news company based there.
The collapse of FTX — which followed other cryptocurrency debacles earlier this year — is adding urgency to efforts to regulate the industry.
Bankman-Fried had been worth tens of billions of dollars — at least on paper — and was able to attract celebrities like Tom Brady or former politicians like Tony Blair and Bill Clinton to his conferences at luxury resorts in the Bahamas.
But since FTX's implosion, legal analysts said that Bankman-Fried risked as much as life in prison, recalling the fate of financier Bernie Madoff who died in a US prison last year after running the largest Ponzi scheme in US history.
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