It’s the name on everyone’s lips: Sam Bankman-Fried.
The 30-year-old crypto whizzkid hit the headlines after his crypto exchange, FTX, tanked this month following “what appears to be massive fraud”, according to the Sunday Times.
He had to resign his position as CEO, and is facing a number of major investigations. There were even rumours this weekend that he’d fled to Argentina.
But who is he, and how has he ended up in this position?
Bankman-Fried, the child of Stanford law professors, started out as a high-frequency trader with Jane Street Capital in New York, before moving to Berkeley, California, to set up the trading firm Alameda Research, that would trade cryptocurrencies.
In 2019, he started FTX, and during the pandemic cryptocurrency prices rocketed; a few weeks ago the company was worth $32bn.
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When crypto prices crashed it initially seemed that Bankman-Fried was the one truly virtuous figure in the sea of uber-crafty speculators that was the world of digital crypto. Rival companies had been using customer deposits to make very big and, it turns out, very bad bets, but Bankman-Fried stepped in with major financial support for Blockfi and Voyager, two rival exchanges.
That was all before leaked account details were published online earlier this month which showed that FTX was trading with fabricated digital tokens that were potentially worthless.
A “liquidity crunch” followed, as investors demanded to withdraw their money, and, as is explained in greater detail here, Bankman-Fried lost 94 per cent of his wealth overnight. FTX filed for bankruptcy.
And so the walls have closed in around him. He’s told Reuters that the rumours about Argentina aren’t true, and that he’s still in the Bahamas (where FTX is based). Nonetheless, last week he tweeted, “I’m sorry. That’s the biggest thing. I f***ed up, and should have done better,” an acknowledgement that things have gone badly wrong on his watch.
Various investigations, by the Department of Justice, the Commodity Futures Trading Commission, and the Securities and Exchange Commission have now been launched.
Bankman-Fried is a self-described utilitarian – someone who is, in theory, motivated in all their decisions by a desire to bring about the greatest amount of happiness for as many people as possible – and at first glance it would appear that it was this mindset that led him to donate millions of dollars to the Democratic Party, especially considering that the majority of his donations during the recent midterm elections went to super PACs (political action committees) that supported candidates for whom pandemic prevention was a central issue. In recent times he’s been the second-largest donor to the party behind George Soros.
Some, however, were sceptical of his professed altruism. As the Financial Times reports, Bankman-Fried also donated to Republican super PACs in the 2022 cycle, specifically those supporting candidates with crypto links (Senator John Boozman, for example, who’s a member of the Senate agriculture committee that oversees crypto).
Back in April he was rubbing shoulders with the likes of Tony Blair and Bill Clinton, hosting panel debates in the Bahamas and discussing exciting crypto opportunities. Now his own stock has fallen, and at a truly eyewatering speed. For now, Bankman-Fried has lived up to his name and been well and truly fried.
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