Tech
FTX: How the fall of the ‘Crypto King’ cost a Brit millions
- By Joe Tidy
- Cyber correspondent
September 25, 2023
With the so-called “Crypto King” set to stand trial on multiple fraud charges, a British man tells how the collapse of Sam Bankman-Fried’s company left him out of a fortune.
Until the final collapse, Sunil Kavuri hoped that Sam Bankman-Fried could change the situation.
The Crypto King’s empire was faltering but while others panicked, Kavuri remained calm.
Experience trading for banks and investing his money in cryptocurrencies has made him accustomed to market dramas.
Furthermore, Bankman-Fried, the self-proclaimed savior of cryptocurrencies, kept telling the world that everything would be fine.
But then the message appeared on the screen: withdrawals suspended.
Image caption, Sam Bankman-Fried, the founder of collapsed cryptocurrency exchange FTX
For Kavuri, years of skilled, stressful and successful trading had gone down the drain.
His $2.1m (£1.7m) was gone.
“I was at the computer for basically 24 hours refreshing the page and trying to email FTX tech support to get my money. I felt sick. I just thought, ‘Oh my God, that’s it. lost everything,'” he says.
Kavuri, who lives in the East Midlands, was saving money for a new house and to send her son to university, but now, almost a year later, all she has is the paper trail of what was once hers.
He is believed to be the worst-hit British victim of the FTX collapse.
FTX had been marketed as a secure way for anyone to engage with cryptocurrencies.
Panorama explores the meteoric rise and sensational fall of Sam Bankman-Fried, the mathematical genius who began to transform the world of cryptocurrency but was ultimately its biggest loser.
The exchange acted as an unregulated bank by allowing people to exchange money for cryptocurrencies, such as Bitcoin, and keep their funds for safekeeping.
It attracted nine million customers in 100 countries. When it collapsed, more than a million users were left without money because they failed to withdraw their money in time. Court documents show that companies, investors and even charities were among those who lost investments.
Next week, US prosecutors will begin their high-profile trial charging Sam Bankman-Fried with seven counts of fraud, conspiracy and money laundering. Bankman-Fried previously said: “I did not steal funds and I did not hide billions.”
The 31-year-old who founded FTX – and a cryptocurrency hedge fund called Alameda Research – has pleaded not guilty and will travel from prison to a New York court to fight the charges.
Other executives at his companies have already pleaded guilty and are expected to provide evidence about how their empire, once worth $40 billion, collapsed.
The main allegation is that Bankman-Fried defrauded clients by using their funds to support his own risky investments in his hedge fund. He spent millions on luxury properties and political donations.
Bankman-Fried’s downfall began next a bombshell investigation into FTX by news site Coindesk. It turned out that Alameda Research’s finances were built on cryptocurrencies that its other company, FTX, had invented and minted itself. Billions of dollars of investments in Alameda were, in effect, backed by a volatile and risky crypto token.
Panicked customers rushed to withdraw billions of dollars from the FTX exchange, until it went bankrupt and filed for bankruptcy.
Shortly before his arrest in the Bahamas, Bankman-Fried stated in interviews: also with the BBC, who was sorry for the financial mistakes he had made. However, he insisted that none of it was intentional or criminal.
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Video caption, Are cryptocurrencies the future of money?
Nearly a year later, investors will be closely watching his court case, while also waiting for news on whether or not they will be able to recover some of their money.
“Sam Bankman-Fried literally destroyed so many people’s lives,” Kavuri says.
He spoke to creditors around the world and became a spokesperson for their cause, calling himself “FTX Creditor Champion” on social media. He also created Telegram groups, where people share stories of their desperation.
“One person in Turkey was left with just $600 (£490) in their bank account after losing everything, and another in Korea was admitted to hospital with panic attacks,” he says.
And like many FTX investors, Sunil also blames the people who helped Bankman-Fried rise to the top. These include influencers and celebrities who have promoted the company – and its CEO – as safe and trustworthy. At the company’s peak in 2022, it ran a Super Bowl commercial in the US, featuring comedian Larry David encouraging investment with the slogan: “Don’t miss out.”
Image caption, Comedian Larry David starred in a TV commercial for FTX
Sunil has filed two of several ongoing civil lawsuits, including one against crypto influencers and celebrities. Larry David, American football star Tom Brady and supermodel Gisele Bündchen are attempting to have the lawsuit thrown out of court. They did not respond to Panorama’s requests for comment.
It is also believed that unraveling FTX’s finances could take years as lawyers try to recover money from every possible avenue.
Kavuri says his confidence in FTX was strengthened when established venture capital firms backed the cryptocurrency exchange with large sums of money. Sequoia Capital famously invested $213m (£174m) in the company, which it has now written off as a loss.
“I saw huge groups [had] they basically gave their stamp of approval to FTX and I thought, ‘OK, this has to be a legitimate exchange,'” he says.
Image caption, Sunil Kavuri faces a long and uncertain wait to recoup some of his investment
Sunil and his wife welcomed their second child on Thursday, giving him even more impetus to recoup some of the lost money.
For now all he can do is watch, wait and hope.
BBC Panorama contacted Sam Bankman-Fried’s lawyers for this article. They say he cannot comment while the legal proceedings are underway.