Sam Bankman-Fried was found guilty of stealing billions of dollars from his Bitcoin exchange FTX customers. It’s a dramatic setback for Silicon Valley’s disheveled wunderkind, who has met celebs such as Gisele Bündchen and Tom Brady.
Bankman-Fried did what he always did on November 7, 2022, when his enterprise began its dizzying, irreversible collapse: he evaluated the odds.
Earlier that day, a rival executive had aired concerns about Bankman-Fried’s crypto exchange’s finances on social media, scaring clients into a multi-billion dollar bank run.
Bankman-Fried conferred with two of his top deputies via online chat. “To be clear, you think the tweet is net bad?” he inquired.
They deliberated about their alternatives. Was it feasible that his opponent would retract his criticism? Could this stop the bleeding? “Fairly unlikely,” wrote Bankman-Fried.
After a guilty verdict, Bankman-Fried risks decades in prison.
It was the kind of calculation Bankman-Fried had been doing for years, the fast computations colleagues said he employed in almost every situation – weighing a break-up, evaluating a dangerous trade.
That strategy worked for a while. Bankman-Fried amassed an estimated $26 billion in personal wealth, multiple magazine covers, and broad political influence as the cryptocurrency’s boy wonder. The flameout was significantly more rapid.
As previously said, the tweet was a flop. In less than five days, billions of dollars poured out of the site. When it was all said and done, more than $8 billion in customer funds had gone missing, and the corporation had gone bankrupt. Five weeks later, prosecutors in Manhattan charged Bankman-Fried, who had already resigned, with wire fraud, securities fraud, commodities fraud, and money laundering.
Two contradicting stories emerged during the four weeks of trial. In one, the erstwhile mogul was a brilliant but clueless genius whose faults as CEO enabled tremendous fraud to take place right under his nose. On the other, with the help of former members of his inner circle, Bankman-Fried stole billions of dollars from customers, betting he’d never be found.
Both accounts show how closely FTX’s fortunes were related to the image of its creator, whose eccentric charisma pulled previous presidents, celebrities, and corporate giants into his sphere and his multibillion-dollar bet.
Bankman-Fried was open about his desire to get wealthy. According to him, he wanted to make all those billions solely to give them away.
After a guilty verdict, Bankman-Fried risks decades in prison.
Bankman-Fried and his younger brother were taught at a young age about utilitarianism, which holds that the most ethical choice is the one that does the most good for the greatest Number of people.
Bankman-Fried attended a seminar by Will MacAskill, a 25-year-old doctorate student at Oxford and the originator of effective altruism, a utilitarian-tinged ideology that uses mathematics to determine how individuals might maximize their philanthropic influence.
Mr. MacAskill advised that to achieve the best, Bankman-Fried should take his enormous brain to profitable Wall Street and contribute most of his pay to worthy organizations.
Bankman-Fried was purchased. In 2014, he applied his degree to Jane Street, a high-frequency trading firm, and reportedly donated around half of his earnings to charitable organizations.
Three years later, Bankman-Fried discovered an industry that may make him wealthy than traditional trading: cryptocurrency.
He launched Alameda Research, a crypto investment firm, at 25 after finding that Bitcoin values fluctuated significantly across countries. Alameda reportedly gained $20 million from arbitrage trading in just three weeks.
In 2019, he established FTX, a Hong Kong-based cryptocurrency exchange for international investors. Like Elizabeth Holmes, another Silicon Valley entrepreneur whose star fell, he got big-name investors to contribute to the company not only money but also credibility.
After a guilty verdict, Bankman-Fried risks decades in prison.
Within months, the daily trading volume on FTX had surpassed $300 million. With a fortune of $22.5 billion, he appeared on the Forbes 400, the magazine’s annual ranking of the wealthiest Americans, in 2021.
Some credit his extraordinary achievement to an exceptionally high-risk tolerance, a willingness to risk severe consequences for a large gain.
“He would be happy to flip a coin if it came up tails and the world was destroyed,” his ex-girlfriend and former CEO of Alameda Research, Caroline Ellison, testified at trial. “As long as if it came up heads the world would be more than twice as good.”
According to internal sources, life at FTX may be likened to a grown-up maths camp, populated by a diverse group of smart misfits and headed by the constantly rumpled Bankman-Fried.
“He was super disorganised, he was always in cargo shorts, he was always sloppy,” a former FTX employee told the BBC. “He would walk around the office in bare feet.”
According to the employee, those at the top were a close-knit group who sometimes unthinkingly listened to Sam. “It could be cult-like.”
Natalie Tien, who oversaw public relations and Bankman-Fried’s schedule at FTX for almost two years, claimed he was charismatic to the point where the company seemed “toxic” at times.
“We just trusted him 100%,” she told the BBC. “To a degree that we kind of worried [about] speaking up for ourselves.”
The company’s employees were not the only ones who were captivated.
Appearing in shorts and ill-fitting T-shirts with Bill Clinton, Tony Blair, Gisele Bundchen, and Katy Perry, he became a type of spokesperson for the crypto business as a whole just as it began to reach new heights.
Part of the mystery stemmed from the fact that Bankman-Fried seemed to forego the amount of luxury that his money could have bought. During the trial, his defense attorneys said he did not own a yacht. He drove an old Toyota Corolla. Meanwhile, he spoke before Congress, calling for greater regulation of the cryptocurrency business, distinguishing himself from many of his contemporaries.
“In a weird way, he seemed kind of like the grown-up in the crypto world,” said Zeke Faux, an investigative journalist and the author of Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.
And then there was the proclaimed final goal: Bankman-Fried would give it all away.
“It was a great story, everybody loved it,” Mr Faux remarked. “People loved it in Congress, the VCs loved it, the bankers loved it.”
“The problem with his story is that it was not true,” he told me.
Sequoia Financing, a venture financing firm, published a breathless profile on Bankman-Fried in their magazine in September 2022. FTX was worth $32 billion at the time.
Author Adam Fisher detailed Bankman-Fried’s efforts to maximize his fortune in order to maximize his impact on the world in the now-deleted essay FTX’s SBF Has a Saviour Complex, and Maybe You Should Too. Fisher wrote that it was risky. “But the maths couldn’t be clearer.”
“To do the most good for the world,” he said, “SBF needed to find a path on which he’d be a coin toss away from going totally bust.”
A month and a half later, industry news site CoinDesk released a shocking story claiming that Alameda had invested more than half of its $15 billion portfolio in FTT, the crypto coin issued by FTX. The announcement sparked concerns about the true worth of Alameda’s interests, as well as the apparent conflict of interest between Alameda and FTX, who are separate entities.
Then, on November 6, industry rival Binance CEO Changpeng Zhao, CZ, said that he would liquidate his own substantial FTT holdings.
On November 11, FTX imploded, taking the story of cryptocurrency’s prodigy.
The fall was not unexpected for some watchers of the crypto boom and Bankman-Fried’s spectacular climb to prominence.
SOURCE – (BBC)
