The rise and fall of FTX CEO Sam Bankman-Fried, who became a crypto billionaire in just 4 years before losing most of his wealth in a single day and resigning from his beleaguered company.
The world could turn upside down in a week
Last Tuesday, Sam Bankman-Fried was a 30-year-old man with mop brown hair and influential enough to pass his initials SBF. It had a cryptocurrency exchange called FTX, a trading firm called Alameda Research, with $15.6 billion to its name, according to Bloomberg estimates. Within four years, he has become one of the biggest names in the crypto world. He set his sights on mainstream finance.
Now only $1 billion and his initials remain. On Friday, FTX announced that Bankman-Fried is stepping down as CEO and will be replaced by John J. Ray III. In addition, FTX, Alameda Research, and approximately 130 affiliated companies have filed for Chapter 11 bankruptcy. The collapse of Bankman-Fried’s fortune had been evident for months. According to The New York Times, reports are circulating this year that FTX is on ‘shaky financial fundamentals’ amid greater instabilities in the global crypto market.
Son of two Stanford Law professors
Bankman-Fried grew up in Silicon Valley the son of two Stanford Law professors. He spent his childhood playing games such as chess and bridge.
Bankman-Fried studied physics at the Massachusetts Institute of Technology. Here he taught several extracurricular courses with his academics. Bankman-Fried says, “I worked for a total of an hour and a half and had a hard time finding a seat on time. I was a really negligent student,” she says.
He gave half of his salary to animal welfare groups.
During college, Bankman-Fried began developing his moral compass. In particular, he was interested in effective altruism, a philosophical movement that uses calculations to understand how people can use their time, money, and resources to best help others.
After college, Bankman-Fried went to work for global trading firm Jane Street. Here he learned the art of arbitrage. According to Bloomberg, during his three years on Jane Street, Bankman-Fried gave half of his salary to animal welfare groups. In addition, effective altruism spent on charities. She left to work for MacAskill’s Center for Effective Altruism, founded by William MacAskill, one of the leaders of the influential altruism movement she.
The Moby Dick of crypto whales
By 2017, the cryptocurrency was booming. People were trading on private exchanges. Bankman-Fried noticed that some cryptocurrencies were priced higher on some exchanges than others. He realized he could use his arbitrage skills to take advantage of price gaps. By October 2017, Bankman-Fried founded his own crypto trading company, Alameda Research, in Berkeley, California. His colleagues at Alameda say he is adept at finding ways to move faster than other traders.
According to Bloomberg, Alameda was moving about $15 million a day between markets at its peak. Bankman-Fried soon earned the nickname ‘Moby Dick of crypto whales’ for making waves in the crypto industry. In 2018, he abruptly relocated Alameda’s team to Hong Kong after noticing how lax the rules were compared to the US. “I think we’re losing $50,000 a day by not working in Hong Kong instead of Berkeley,” one of her colleagues told Insider.
How was FTX founded and grown?
As Bankman-Fried continued to raise money from the trade, so did his ambitions. He had fun thinking about creating an alternative to what he called the ‘sh.tshow exchanges’ he traded between 2017 and 2018. At the beginning of 2019, Bankman-Fried and his team were working hard to create their own crypto exchange. After four months of coding, they released FTX in May.
FTX was a victory. The platform boasted of cost-effective features such as low transaction fees. It also offered investors various types of tokens to bet on. FTX even allowed traders to exchange cash as collateral for cryptocurrencies. In 2020, Bankman-Fried also opened a small US branch of FTX. They had plans to eventually take a large share of the US crypto market. In line with this, he began lobbying Congress for new crypto rules several times a year. Also, the pro-crypto super PAC donated millions to the GMI PAC, according to Politico. In September 2021, Bankman-Fried decided to move FTX’s operations to the Bahamas. It was just a flight from Miami, but the platform would still be able to operate outside the scope of the SEC.
FTX only takes a small deduction from each transaction. But by 2020, an average of $1 billion was traded on the platform daily, according to Bloomberg. According to Bloomberg, in 2021 alone, Bankman-Fried made $350 million in profits from FTX and another $1 billion from Alameda.
Major investors such as SoftBank Vision Fund, Tiger Global, Sequoia Capital and BlackRock have bet on FTX in their funding rounds. According to Forbes, in early 2022, FTX and its US operations were worth a combined $40 billion by investors. According to Bloomberg, Bankman-Fried’s own net worth was $26 billion at its peak. He devoted this wealth to sponsorships, funding political leaders, and advancing his moral agenda.
Political donations from FTX CEO
According to Politico, it has suddenly emerged as a major political donor in 2020. He spent more than $10 million supporting Joe Biden’s presidential campaign. However, Politico reports that Bankman-Fried made his political first donation to Democratic Senator Michael Bennet of Colorado in 2010. It spent over $40 million on campaigns in 2022, according to Federal Election Committee filings reviewed by Politico.
While the majority of his funds went towards Democratic leaders, he made donations on both sides of the political aisle. The Los Angeles Times reported $1 million to Bankman-Fried’s Senate Majority PAC and $6 million to the House Majority PAC. According to Politico, as the main funder of Pandemic Protection, a non-profit organization run by his brother Gabe, Covid-19 has made prevention a top priority.
A simple life, expensive deals…
Bankman-Fried said her donations are to advance her belief in effective altruism. He told Bloomberg that he would eventually keep only 1% of his income, or at least $100,000 a year. His simple lifestyle also follows effective altruism ideas. He drives a Toyota Corolla, lives with roommates, and is vegan.
It also poured money into flashy corporate sponsorships. Most notably, it acquired the naming rights for the Miami Heat arena, which would cost $135 million over 19 years, according to Bloomberg. According to Bloomberg, he spent nearly $30 million airing an ad with comedian Larry David during the 2022 Super Bowl. Bankman-Fried has also signed deals with major basketball teams such as the Washington Wizards and Golden State Warriors through FTX. FTX has also made deals with individual athletes such as basketball player Steph Curry and quarterback Tom Brady.
And finally: the collapse of FTX and Bankman-Fried
Bankman-Fried seemed unstoppable. Earlier in November, a balance sheet leaked that showed Alameda Research was on unstable ground. The report revealed that most of Alameda’s assets are tied to FTX’s in-house token, FTT. With the broader crypto market already reeling, traders are starting to worry about a sudden drop in FTT value.
Changpeng Zhao, who runs FTX’s rival exchange Binance, announced that Binance will soon sell its FTT shares. However, all traders started rushing to withdraw their own holdings from the FTX platform. Bankman-Fried had no choice but to ask Binance to bail out FTX.
cryptocoin.comAs you follow on Wednesday, Binance dropped the deal. According to Bloomberg, Bankman-Fried’s own assets fell 94% and her net worth fell by nearly $1 billion. On Friday, FTX announced that Bankman-Fried is stepping down as CEO. But he noted it would help new CEO John J. Ray III ‘an orderly transition. The announcement also includes FTX, Alameda Research, and 130 additional subsidiaries filing for voluntary Chapter 11 bankruptcy.
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