Trivia about Sam Bankman-Fried, the embattled founder of FTX

The collapse of $32 billion cryptocurrency exchange FTX, like other scandal-ridden corporate failures, has thrown a once-celebrated executive into the glare of public scrutiny.

Sam Bankman-Fried, the 30-year-old founder of FTX, quickly rose to the forefront of the cryptocurrency sector and has made a name for himself in recent years as a philanthropist and a leading advocate for industry regulation. The August cover of Fortune Magazine asked readers if Bankman-Fried, known to some as “SBF,” was “the next Warren Buffett.”

More recently, however, he’s faced scathing questions about the mismanagement of billions of dollars in client funds. Meanwhile, his net worth fell from $16 billion to $0 in less than a week, according to a Bloomberg estimate.

Concerns about financial instability at FTX — a top platform where users buy and sell crypto — sparked a surge in client withdrawals totaling billions of dollars. But FTX lacked sufficient funds to pay the sellers and instead halted withdrawals altogether. Some crypto traders who deposited their savings on the platform fear they will never get their money back.

Days later, the company filed for bankruptcy and Bankman-Fried resigned as CEO. FTX and Bankman-Fried did not immediately respond to a request for comment.

Here’s what you need to know about Bankman-Fried:

Board games and a philanthropic movement

Bankman-Fried grew up in Palo Alto, California, near Stanford University, where both his parents were law professors.

He attended an elite preparatory school, where he excelled academically, and spent his free time playing video games such as League of Legends and the card game Magic: The Gathering, according to a profile published by venture firm Sequoia Capital, which invested in FTX.

PHOTO: FILE PHOTO: Former FTX CEO Sam Bankman-Fried poses for a picture at an unspecified location in this undated handout image obtained by Reuters on July 5, 2022.  FTX/Handout via REUTERS/File Photo/File Photo/File Foto

Former FTX CEO Sam Bankman-Fried poses for a picture at an unspecified location in this undated handout image obtained by Reuters on July 5, 2022.

Ftx via Reuters, FILE

In 2010, he began attending the Massachusetts Institute of Technology, where he lived in a co-ed living group called Epsilon Theta, which advertises itself as an alcohol-free venue for activities like board games, square dancing and debating logic problems, the website says .

At MIT, Bankman-Fried met William MacAskill, an early proponent of effective altruism, an approach to philanthropy that believes in an unshakably rational assessment of how to maximize the positive impact of one’s actions.

Some proponents of EA encourage aspiring world improvers to get rich through high-paying careers in business or finance, and in return donate their earnings to make the world a better place as much as possible.

With this in mind, Bankman-Fried, a physics student, did an internship at data-driven trading firm Jane Street during the summer after his junior year, where he continued to work after graduation. After trading with the company for three years and donating some of his money, Bankman-Fried sought a new challenge, Sequoia Capital said.

A splash in cryptocurrency

In 2018, then 25-year-old Bankman-Fried made the transition from quant trading on Wall Street to the relatively new world of cryptocurrency investing.

Almost immediately, he spotted an arbitrage that could deliver massive returns: Bitcoin was trading 10% higher in Japan than in the US. If Bankman-Fried could buy large amounts of the popular token in the US and sell it in Japan, he stopped to make a nice profit.

Working with friends from Alameda Capital, a hedge fund he founded, Bankman-Fried moved up to $25 million in Bitcoin every day. “You can do the math,” he told New York Magazine. “It was the craziest trade I’ve ever seen.”

In the months that followed, Bankman-Fried moved to Hong Kong, partly with the money he amassed from that trade, and founded FTX.

The Rise of FTX and Bankman-Fried

FTX, an exchange that allows users to buy and sell cryptocurrency, generated revenue by charging clients trading fees and selling a crypto token created by FTX, which allowed users to buy and sell on the platform at a discount to sell.

Customers flocked to the exchange for the low trading fees, variety of coins on offer, and complex futures and options trades available. In its early years, which coincided with a crypto boom as pandemic-related stimulus drove money into the sector, FTX added hundreds of thousands of users and a few large investors.

In 2021, the company relocated to the Bahamas to find a favorable regulatory environment.

PHOTO: Samuel Bankman-Fried, Founder and CEO of FTX, testifies during a Senate Committee on Agriculture, Food and Forestry Committee hearing "Studying digital assets: risks, regulation and innovation," on Capitol Hill in Washington, DC

Samuel Bankman-Fried, Founder and CEO of FTX, testifies during a Senate Agriculture, Food and Forestry Committee hearing on “Examining Digital Assets: Risks, Regulation and Innovation” on Capitol Hill in Washington, DC.

Saul Loeb/AFP via Getty Images, FILE

In July of this year, a $900 million funding round valued the company at $18 billion. A few months later, the valuation rose to $25 billion. Finally, the company’s value rose to a peak of $32 billion in January.

The success skyrocketed Bankman-Fried’s wealth and notoriety.

Last October, Forbes hailed Bankman-Fried as the world’s richest person under the age of 30, putting his net worth at more than $20 billion.

Wearing a signature T-shirt and messy hair, Bankman-Fried attended conferences, spoke on television, and testified before Congress. As a celebrity ambassador for the shaky world of cryptocurrency, he became a frequent public advocate and private lobbyist in favor of US regulations regulating the industry. He even helped bail out other struggling crypto companies.

Consistent with his earlier commitment to effective altruism, he also established himself as a prolific philanthropist and political donor. Among a string of donations that went primarily to Democrats, Bankman-Fried donated $5.2 million in support of Joe Biden’s 2020 presidential bid, making him the second-biggest donor to the campaign after former New York Mayor Michael Bloomberg.

At a cryptocurrency meeting in the Bahamas in April, Bankman-Fried demonstrated his status in the industry by moderating a panel with former President Bill Clinton and former British Prime Minister Tony Blair.

The Decline of FTX and Growing Control

FTX’s collapse stems in part from the cryptocurrency exchange’s close relationship with Alameda Research, the crypto hedge fund also founded by Bankman-Fried.

Major concerns about FTX began when news agency CoinDesk published an article noting that a significant portion of Alameda Research’s assets consisted of FTT, a token created by FTX that gives users of the exchange access to discounted trading fees.

As FTT cannot be easily exchanged for cash, the report raised fears about the capital reserves at Alameda Research and, by extension, FTX.

Within days, Changpeng Zhao, the CEO of rival crypto exchange Binance, said he would sell all of the company’s shares to FTT, totaling a $580 million token.

The big exit from a crypto heavyweight triggered a broader bank run-like sell-off that put immense pressure on FTX to meet sudden demand for client withdrawals, forcing the company to halt withdrawals and putting billions in client funds at risk.

“I’m sorry,” Bankman Fried said After the sell-off, he added that he “should have done better”.

Meanwhile, The Wall Street Journal reported that FTX lent client deposits to Alameda Research to help it meet its liabilities, and Alameda Research’s senior executives were aware of this, further scrutinizing the relationship between Alameda Research and FTX .

When FTX finally filed for bankruptcy last Friday, Bankman-Fried resigned.

FTX’s collapse is under investigation by the Securities and Exchange Commission and the Justice Department, the Wall Street Journal reported. Federal prosecutors are also investigating the sinking, a source told ABC News.

On Wednesday, Vox published an interview in which Bankman-Fried used an expletive to slur the regulators, admits that his previous calls for stricter crypto regulation were fueled by PR concerns, and says he regrets the company’s bankruptcy.

In the interview, he described his public commitment to ethics as “a silly game we westerners play”.

John Ray, the new CEO installed to lead the company through the bankruptcy process, said in a court filing that he had never seen such a “complete failure” in corporate controls in his career, including while working Enron through to go bankrupt.

“From compromised system integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially vulnerable individuals,” Ray said.

“This situation is unprecedented,” he added.


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