The arrest comes on the eve of Bankman-Fried's scheduled appearance at a US Congress hearing in which he was to testify under oath about the crypto exchange's overnight demise.

Disgraced crypto tycoon Bankman-Fried arrested in Bahamas, SAUL LOEB / AFP

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 US 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.

As much as anyone, Bankman-Fried had embodied the apparent emergence of cryptocurrency as an above-board investment and no longer a frowned on get-rich-quick scheme shunned by the banking establishment.

But after reaching a valuation of $32 billion, FTX's implosion was swift following a November 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 November 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.