Tech
The fall of FTX “crypto king” Sam Bankman-Fried
- By Joe Tidy
- IT reporter
November 13, 2022
Updated December 13, 2022
Image source, Getty Images
Image caption, FTX founder Sam Bankman-Fried was once nicknamed the “King of Cryptocurrencies”
At 18:00 local time (23:00 GMT) on Monday 12 December, agents from the Bahamas Financial Crimes Investigation Unit arrested Sam Bankman-Fried at his apartment complex in Nassau, at the request of the US government, based on a sealed indictment filed by the Southern District of New York (SDNY).
The man previously dubbed the “Crypto King” saw his company collapse, stepped down as CEO and now faces a criminal investigation.
In recent years, the Internet has been flooded with lengthy interviews with him, as he spoke via video chat from his office desk in the Bahamas.
In some of them you can hear a distracting clicking noise.
As his interviewees listen intently to his incredible story of how he became a multibillionaire in five years, the sound is persistent and clearly comes from the American entrepreneur’s mouse.
“Click, click, click,” he says, in quick, on-off bursts.
Meanwhile, Mr. Bankman-Fried’s eyes dart across the screen.
It’s not clear from the videos what he’s doing on his computer, but his tweets may give us a pretty good clue.
“I’m (in)famous for playing League of Legends during phone calls,” he tweeted in February 2021.
Mr Bankman-Fried, the former head of cryptocurrency exchange FTX, is an avid gamer. And in a series of tweets to his nearly one million followers, he explained why. Playing the fantasy team battle game was his way of getting his mind away from running two companies that traded billions of dollars a day.
“Some people drink too much; some people gamble. I play League,” he said.
Image caption, Sam Bankman-Fried had so much fun playing a video game called Storybook Brawl that he purchased the manufacturer in March 2022
According to a blog post from venture capital giant Sequoia Capital, Bankman-Fried played an intense League of Legends battle during a high-level video call with their investment team.
This, however, did not seem to discourage them at all. The group invested $210 million in Bankman-Fried’s FTX company.
Sequoia Capital has since deleted that exciting blog post and announced that it is now writing off its investment in FTX as a loss.
The firm is not the only investor to have lost huge amounts of money since Bankman-Fried’s $32 billion empire collapsed.
FTX had around 1.2 million registered users who used the exchange to purchase cryptocurrency tokens like Bitcoin and thousands of others.
From big-time traders to everyday cryptocurrency enthusiasts, many are wondering if they will ever be able to recover their savings trapped in FTX digital wallets.
It’s a dizzying fall, and Bankman-Fried’s rise is also a dramatic story of risk, reward and nonsense.
Bankman-Fried attended the Massachusetts Institute of Technology (MIT), a prestigious US research university, where he studied physics and mathematics.
But the bright young college student says it was the lessons he learned in the student dorms that set him on the path to becoming rich.
In a BBC radio interview, recalled being involved in the “effective altruism” movement. Effective altruism is a community of people “trying to figure out what practical things you can do in your life to have the greatest positive impact on the world as possible,” he said.
So, as Bankman-Fried recalls, he decided to go into banking to earn as much money as possible and give it back to good causes.
He learned stock trading during a short stint at the Jane Street trading firm in New York before getting bored and deciding to experiment with Bitcoin.
He noticed the variations in the value of Bitcoin between different cryptocurrency exchanges and began doing arbitrage, buying Bitcoin from places that were selling it cheap and reselling it to other places where it was trading for more.
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Video caption, Are cryptocurrencies the future of money?
After a month of modest profits, he teamed up with some college friends and started a business called Alameda Research.
Mr Bankman-Fried says it hasn’t been easy and has taken months to perfect techniques on how to move money in and out of banks and across borders. But after about three months, he and his little team hit the jackpot.
“We were super tough,” he said on the Jax Jones and Martin Warner Show podcast a year ago. “We just kept moving forward. If someone created another obstacle, we would get creative, and if our system couldn’t handle it, we would just build a new system to overcome that obstacle.”
As of January 2018, his team was making $1 million every day.
A CNBC business reporter recently asked him how he felt.
Intellectually and according to his methodology, he said, “it made perfect sense.” “But viscerally, she surprised me every day,” she said.
Sam Bankman-Fried officially became a billionaire in 2021, thanks to his side business and more high-profile, FTX. The cryptocurrency exchange has grown to become the second largest in the world and an industry titan, trading $10-15 billion per day.
Image caption: “I mostly sleep on a beanbag,” Bankman-Fried told her Twitter followers
As of early 2022, FTX was valued at $32 billion and a household name, with an NBA stadium named after the company and endorsements from celebrities like the NFL’s Tom Brady.
Meanwhile, Mr Bankman-Fried appears to be happy to give his Twitter followers an insight into his lifestyle. He mostly sleeps on a beanbag next to his desk in the office, he said, with a photo of him lying next to his staff at the trading terminals.
In another, he posted in the early hours of the morning. “Couldn’t sleep. Back to office,” she wrote.
Bankman-Fried’s dream of donating large sums of money to charity was also well underway. In the BBC radio interview last month, you said you had donated “a few hundred million for now”.
And his generosity didn’t just extend to charities. Over the past six months, the “King of Cryptocurrencies” has been given another nickname: “White Knight of Cryptocurrencies.”
As cryptocurrency prices drop in 2022, the so-called “Crypto Winter” is in full swing. While other companies in the industry faltered, Bankman-Fried doled out hundreds of millions in bailout money.
Asked why he was trying to prop up failing crypto firms, he told CNBC: “It’s not going to be good in the long run if we have real problems and real blowouts. And it’s not fair to customers.”
In the same interview he also said that he has $2 billion in reserve that he could use to help failing crypto companies.
But soon after, he went around the same industry himself, trying to raise money to save his company and his clients.
Subsequently, questions began to arise about the real financial stability of FTX an article on CoinDesk The website suggests that much of Bankman-Fried’s Alameda Research trading giant rests on a foundation made up largely of a coin invented by an FTX sister company, not an independent asset.
The beginning of the end however came when FTX’s main competitor, Binance, publicly sold all of its FTX-linked crypto tokens a few days later.
Binance CEO Changpeng Zhao told his 7.5 million followers that his company would sell stakes “in light of recent revelations.”
Image source, Getty Images
Image caption, Binance boss Changpeng Zhao shared brief exchanges on Twitter with his rival Mr Bankman-Fried
This sparked a run on FTX, with panicked customers withdrawing billions of dollars from the cryptocurrency exchange.
Withdrawals were halted and Mr Bankman-Fried sought a bailout, with Binance at one point publicly considering a buyout before walking away.
Binance said reports of “mismanaged client funds and alleged investigations by US agencies” influenced its decision.
The next day, FTX was declared bankrupt.
Mr Bankman-Fried apologized in a series of tweets, saying: “I am truly sorry, once again, that we ended up here.
“We hope that things can find a way to recover. We hope that this can bring them some transparency, trust and governance.”
He also said he “was shocked to see things unravel the way they did.”
Yet he remained optimistic. A few days before his arrest, Mr. Bankman-Fried told me he hoped to start a new business to earn enough money to repay the victims of the FTX collapse.
Asked whether he was preparing for the possibility of arrest, he said: “There’s some time at night to ruminate, yes, but when I get up during the day, I try to concentrate, to be as productive as possible and to ignore things that are out of the question.” of my control.”
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