What is FTX and why has the cryptocurrency service's founder been arrested in the Bahamas?

He was a mathematically gifted student born on the campus of US Ivy League university Stanford and just two months ago had a net worth of more than $15 billion (£12.2bn).

Now Sam Bankman-Fried is in police custody in the Bahamas and is facing a potential prison sentence over various fraud charges and money laundering.

Mr Bankman-Fried, 30, is expected to be extradited to the United States, where the charges were brought following the collapse of his cryptocurrency exchange FTX last month. Investors on the platform are owed as much as $3.1bn (£2.5bn), with experts warning they may only get back a fraction of what they are owed now the company has filed for bankruptcy.

The FTX exchange allowed customers to trade normal money for cryptocurrencies like Bitcoin.

Sam Bankman-Fried speaking on stage at a charity gala in New York City earlier this year. Picture: Getty Images

Police arrested the FTX chief executive, who was at one time regarded as a young version of legendary US investor Warren Buffett, in his apartment complex in the Bahamas at 6pm local time on Monday night, hours after prosecutors for the Southern District of New York confirmed Mr Bankman-Fried had been charged.

The entrepreneur had previously become known for making donations to political causes, specifically the Democratic party, and claimed he planned to donate the great majority of his wealth to effective charities over the course of his life.

The US Attorney's office in Manhattan said in a tweet: "Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the SDNY [Southern District of New York]. We expect to move to unseal the indictment in the morning and will have more to say at that time."

According to reports, Mr Bankman-Fried complied with police during the arrest.

The criminal charges against the former billionaire included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. Separately, Wall Street regulator the Securities and Exchange Commission said in a statement it had authorised charges “relating to Mr. Bankman-Fried’s violations of our securities laws”.

He had been due to speak remotely before the Congress House financial services committee on Tuesday, but will instead appear before a court in the Bahamas. It is not know how long any extradition proceedings could take.

In a statement, Congresswoman Maxine Waters, who chairs the committee, said she was disappointed Mr Bankman-Fried would no longer be appearing at the hearing.

“Although Mr Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr Bankman-Fried about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many,” she said. “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity.”

FTX’s collapse began early last month, when a run on deposits revealed an $8bn (£6.5bn) hole in the company’s finances. Mr Bankman-Fried asked crypto exchange Binance to bail him out. However, the deal fell through after Binance examined FTX’s books and decided not to go ahead with any transaction.