Sam Bankman-Fried, founder and former CEO of the cryptocurrency exchange FTX, was arrested in the Bahamas on Monday at the request of the United States.
The arrest came after U.S. prosecutors filed criminal charges against him following the collapse of his FTX platform, said a statement from the government of the Bahamas.
The cryptocurrency tycoon's arrest appears to be on the eve of his scheduled appearance at a U.S. Congress hearing in which he was to testify under oath about the cryptocurrency exchange's overnight demise.
The 30-year-old had in recent weeks defied legal advice and multiplied media appearances offering his version of his company's sudden failure, usually by video link from the Bahamas where his company is headquartered.
"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 southern district of New York," said a tweeted statement from Damian Williams, lead prosecutor for the district.
"We expect to move to unseal the indictment in the morning and will have more to say at that time," he added.
According to a press release from the attorney general's office in the Bahamas, Bankman-Fried was to be held in custody before an expected request for his extradition by the U.S.
The Bahamian prime minister's office shared news of the arrest, as well as a police statement saying Bankman-Fried was arrested in the early evening at his apartment complex in the capital Nassau.
He was taken into custody without incident, the statement said, and was to appear in court in Nassau on Tuesday.
As much as anyone, Bankman-Fried had embodied the apparent emergence of cryptocurrency as an aboveboard investment and no longer a frowned-on get-rich-quick scheme shunned by the banking establishment.
Celebrities plugged his FTX platform into advertising campaigns and the cyber whiz kid became a regular presence in Washington where he donated tens of millions of dollars in political contributions.
But after reaching a valuation of $32 billion, FTX's implosion was swift following a Nov. 2 report on ties between FTX and Alameda, a trading company also controlled by Bankman-Fried.
The report exposed that Alameda's balance sheet was heavily built on the FTT currency – a token created by FTX and with no independent value.
The price of FTT plunged in early November, roiling both Alameda and FTX, where Alameda had large trading positions.
Reeling from customer withdrawals and short some $8 billion, FTX and some 100 related entities filed for bankruptcy protection on Nov. 11, inviting scrutiny from regulators, prosecutors and furious clients who had believed the hype about cryptocurrency.
Among the revelations, FTX is suspected of fraud for propping up Alameda with billions of dollars in customer funds that are now likely lost forever.
Questions also linger over whether Bankman-Fried engaged in market manipulation, or illegally provided inside information to Alameda.
"If convicted he could be facing the rest of his life in prison, given the dollar amount of the fraud," Jacob S. Frenkel, a former federal criminal prosecutor at Dickinson Wright, told Agence France-Presse (AFP).
"We would not see an indictment if prosecutors were not absolutely convinced that they will win a conviction," he added.
In his media interviews, Bankman-Fried has admitted to mistakes but has denied intent to defraud his customers.
FTX CEO John Ray, who came to the company after the debacle, was to tell Congress on Tuesday that the problems arose because control was "in the hands of a tiny group of grossly inexperienced and unsophisticated individuals."
"Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever," Ray said in prepared remarks.
The fall of FTX has caused major doubts about the long-term viability of cryptocurrency and heaped stress on other platforms and entities that rode the success of Bitcoin and other currencies.
