Sam Bankman-Fried: The rise and fall of a cryptocurrency prodigy

Sam Bankman-Fried owned an estimated $22.5 billion fortune earlier than he was 30. Solely Mark Zuckerberg had executed higher at that age due to a money-making machine known as Fb. However after he turned 30, every thing modified. Now that FTX has filed for chapter, this Californian and son of two Stanford College legislation professors is not even a member of the billionaires’ membership. His dizzying fall has so much to do with the world through which he constructed his wealth – cryptocurrency – the place money and time run at a distinct pace. It’s quick and risky, and all the time calls for extra.

However SBF, because the FTX founder is understood, by no means appeared hell-bent on accumulating wealth for himself. Neither is he an ardent libertarian like lots of the anti-taxation Bitcoin trustworthy. SBF believes that the wealthy, together with himself, ought to pay extra taxes. He’s loath to proclaim cryptocurrency omnipotence as others do, and as a substitute espouses a realistic method to make them worthwhile. SBF is a proponent of “efficient altruism,” a philosophy that advocates maximizing the nice you are able to do for others together with your cash. He even promised to present away most of his fortune throughout his lifetime. “My objective is to have affect,” he mentioned in an interview with Forbes journal final 12 months.

And for some time, it appeared that his beneficiant philosophy might certainly have lasting affect. At its peak, his fortune stood at $26.5 billion. However a lot of that fortune was tied to his FTX shareholdings and the FTT token, each of which swiftly collapsed from a liquidity disaster that triggered large withdrawal requests by clients panicked by the prospect of shedding every thing.

SBF’s ascent was equally swift. The younger man based quantitative buying and selling agency Alameda Analysis in 2017, and rapidly added zeros to his checking account after exploiting a seemingly apparent alternative. “Bitcoin was buying and selling for $10,000 on a US alternate and $11,000 on a Japanese alternate. You are taking $10 million… you purchase $10,000, you promote at $11,000, you make one million {dollars}, and we have been ready to try this each weekday,” he defined in a video.

He claims to have made $20 million that approach and used the cash two years later to create FTX in Hong Kong, a buying and selling platform for getting and promoting Bitcoin and different cryptocurrencies. FTX turned one of many largest cryptocurrency exchanges on this planet and was as soon as valued at $40 billion. In September 2021, he moved his headquarters to the Bahamas, the place he lives in a penthouse with 10 associates, together with some who run his companies. Though his lifestyle is clearly higher than most, he eschews luxuries like costly watches and sports activities vehicles, and as a substitute drives a $20,000 Toyota Corolla.

A physics main who graduated from the distinguished Massachusetts Institute of Expertise (MIT), SBF is a vegan and dedicated animal safety and local weather change activist. He grew up loving the Harry Potter books, the San Francisco Giants baseball group, and video video games like Starcraft and League of Legends.

Till lately, SBF’s life appeared to be a online game that he was all the time profitable. One among his shut colleagues tells the story of how he watched SBF play League of Legends whereas concurrently engaged in a Zoom video assembly with traders from Sequoia Capital. His multitasking talent was such that SBF was capable of persuade the traders to jot down a test that day and likewise win the online game. Sequoia Capital lately introduced that it was writing down its $210 million FTX funding to zero.

Though he’s now the seen face of a company disaster which will wipe him out and trigger heavy losses for his purchasers, SBF was as soon as the second richest man within the crypto world after Binance CEO, Changpeng Zhao. In August, Fortune journal known as him the subsequent Warren Buffett, evaluating the Berkshire Hathaway tycoon’s $5 billion rescue of Goldman Sachs in the course of the Nice Recession, to SBF’s current life-saving assist to a couple firms embattled by the continued crypto winter. Different pundits went additional again in historical past and known as him a modern-day John Pierpont Morgan, the legendary financier who was pivotal in saving the US monetary system in the course of the panic of 1907 when Wall Road collapsed underneath an avalanche of financial institution and different enterprise failures.

However the white knight who used FTX assets to bail out embattled crypto corporations Voyager Digital and BlockFi immediately discovered himself cornered. As he appealed on social media and elsewhere for assist, he overtly acknowledged his personal accountability. “I fucked up,” he crudely admitted in a sequence of messages explaining what occurred, and he apologized to clients who couldn’t get their cash out. However his public mea culpas couldn’t stem the tide that finally drowned the corporate and prompted a whole lot of hundreds of small traders who trusted in FTX to lose cash.

Hundreds of thousands in political donations

Just some days in the past, earlier than the storm, SBF’s Twitter posts had a really completely different really feel. Within the run-up to the midterm elections, he talked about donating $40 million to Republican and Democratic candidates who have been dedicated to stopping new pandemics and selling cryptocurrency-friendly laws.

His $5 million donation to Joe Biden’s presidential marketing campaign a number of years in the past attracted media consideration because the second largest behind Michael Bloomberg’s $56 million contribution. And he talked about elevating the stakes even greater in 2024. In a Might podcast interview, SBF hinted at making a record-breaking billion-dollar donation to the 2024 Democratic candidate for president, particularly if Donald Trump turned the Republican nominee.

That may by no means occur now. Binance backed out of its FTX buyout bid after reviewing the corporate’s books, and the US Securities and Trade Fee (SEC) launched an investigation into potential misuse of shopper funds for unauthorized danger operations. It was an excessive amount of for the younger man who as soon as paid $135 million for the naming rights to the sector the place the NBA’s Miami Warmth play their house video games. All the pieces the precocious SBF had constructed within the cryptocurrency world had collapsed, and he has joined the undesirable ranks of failed enterprise leaders like Do Kwon, the South Korean creator of the defunct Luna cryptocurrency. It’s a a lot much less flattering comparability than Warren Buffett and J.P. Morgan.