Sam Bankman-Fried, also known as SBF, is an American cryptocurrency entrepreneur and former CEO of FTX, one of the world’s largest crypto firms, which collapsed in November 2022 due to insolvency problems with Alameda Research — the FTX sister firm co-founded by SBF.
Who is Sam Bankman-Fried?
SBF was born in the United States state of California to two Stanford Law School professors on March 6, 1992. He has a high-profile education, attending high school at Crystal Springs Uplands School in Hillsborough, California, and Canada/USA Mathcamp, which is a summer program for mathematically talented high-school students. He graduated in physics and mathematics from the Massachusetts Institute of Technology in 2014.
SBF started his career in 2013 as an intern at Jane Street Capital — a proprietary trading firm specializing in international exchange-traded funds — where he acquired his first work experience. He went to work full-time at Jane Street after graduating from MIT. In November 2017, he co-founded quantitative trading firm Alameda Research with Tara Mac Aulay from the Centre for Effective Altruism, where he briefly worked as development director.
In April 2019, SBF founded the cryptocurrency exchange FTX, which started operating the following month. In 2021, SBF ranked third in the Cointelegraph Top 100 personalities of the cryptocurrency space, and in 2022, he took the top spot.
What is Bankman-Fried known for?
Bankman-Fried played a prominent role in the cryptocurrency industry. Before the FTX collapse, he was reported to have a net worth of $26.5 billion, ranking him the 41st richest American in the Forbes 400 and the 60th richest person in the world by The World’s Billionaires.
In May 2022, when FTX was still one of the world’s largest crypto platforms, SBF purchased a 7.6% stake in brokerage firm Robinhood. His shares became the object of contention after FTX collapsed on Nov. 11, 2022.
During FTX’s collapse, he also became known to a broader audience. He is alleged to have committed one of America’s most significant financial frauds, with his net worth falling to roughly $16 billion — and then nearly zero — in just one week.
Here are the most significant events marking his turbulent life and career in cryptocurrency, and how the crypto entrepreneur fell from grace in the blink of an eye.
Bankman-Fried and Mac Aulay were joined by Caroline Ellison at the launch of Alameda Research. Ellison knew SBF from working together at Jane Street and the Center for Effective Altruism. She became CEO of the company alongside American business executive Sam Trabucco, who stepped down from the role in August 2022, right before the storm hit the cryptocurrency firm.
Alameda made millions of dollars daily, actively trading cryptocurrency among various international markets, but claimed they were all doing it for altruism and the excitement of earning to give. Ellison and SBF were allegedly in a relationship, although SBF confirmed it had only been for a brief period.
Cryptocurrency exchange FTX
The Bahamas-based FTX was co-founded with cryptocurrency billionaire Gary Wang and launched in the spring of 2019. It became prominent during the COVID-19 pandemic despite the significant turbulence in financial markets, including crypto. In 2020, the crypto trading company acquired Blockfolio — a cryptocurrency exchange and platform — for $150 million.
It then pursued a series of acquisitions in crypto, including the failed crypto lending platform Voyager and derivatives trading platform LedgerX. It was also on the verge of acquiring crypto exchange BlockFi and lending firm Celsius, which were in troubled waters amid a crypto liquidity crunch in 2022.
In the meantime, FTX was expanding, and Bankman-Fried appeared to be in a strong position despite the turmoil in cryptocurrency markets. His peak net worth of $26.5 billion was reportedly valued in FTX’s native FTX Token (FTT), sparking the first allegations that his tokens were used as collateral on several occasions.
The collapse of the SBF financial empire
On Nov. 2, 2022, it was reported that most of the cash held by FTX was in the form of its cryptocurrency, FTT, implying that it could be easily manipulated due to its centrally controlled supply and that it had been illegitimately used as collateral.
The news severely impacted the entire cryptocurrency market in only a few days, particularly after Binance CEO Changpeng “CZ” Zhao announced his intention to sell all FTT holdings, tanking the price of the FTX Token by around 80 percent.
When the liquidity crisis started due to the collapse of FTT, CZ issued a letter of intent to buy FTX. However, after reviewing the exchange’s financials, which revealed a financial hole of $6 billion, he walked away from the deal.
In the meantime, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) were already investigating Alameda Research and FTX US, among other cryptocurrency firms, over insider trading claims.
As no investors were willing to save FTX, which required as much as $9.4 billion in funds to be rescued, SFB had no choice but to file for bankruptcy and resign as CEO on Nov. 11, 2022. Alameda Research and more than 130 associated legal entities met the same fate. Bankman-Fried was replaced as CEO of FTX by John Ray, known for his role in the bankruptcy and restructuring of the American energy company Enron.
On Nov. 12, blockchain observers spotted the movement of hundreds of millions of dollars from FTX, with customer funds moved to other crypto wallets and going missing.
How much money was lost in FTX?
The same day observers saw customer funds suspiciously leave the exchange, SBF was reported to have illegally taken clients’ money for Alameda Research without publicly disclosing it.
Anonymous sources also revealed to The Wall Street Journal that Alameda Research’s CEO, Caroline Ellison, had confirmed that FTX had used customers’ money to help Alameda meet its liabilities.
What happened to Bankman-Fried?
On Nov. 30, 2022, in an interview with The New York Times, Bankman-Fried said he was left with about $100,000 in his bank account. The 30-year-old — once one of the wealthiest entrepreneurs in the world and one of the largest U.S. political donors — was in ruins by the end of 2022 as significant legal actions loomed.
On Dec. 12, 2022, Bankman-Fried was arrested at his Bahamas penthouse by the Royal Bahamas Police Force in anticipation of his expected extradition to the U.S. to face trial.
He was charged by the U.S. District Court for the Southern District of New York with wire fraud, wire fraud conspiracy, securities fraud, security fraud conspiracy, money laundering and other charges, and faces a maximum of 115 years in prison if convicted on all counts.
After spending 10 days at Nassau Fox Hill Prison in the Bahamas, SBF agreed to his extradition from the Caribbean island to the U.S. to face charges. On Dec. 22, a federal judge decided to release him from custody with a $250 million bond payment, the largest in the history of American criminal proceedings. Among his bail conditions are that he resides at his parent’s home in California.
Criminal trial developments
On Jan. 3, 2023, Bankman-Fried pled not guilty to fraud and other charges, claiming that mismanagement of the exchange and not fraud caused the collapse of the business. Four additional criminal charges were added against him in February based on over 300 illegal political donations.
In March, the court raised allegations that he had arranged the transfer of at least $40 million in cryptocurrency to Chinese government officials to unfreeze accounts belonging to Alameda Research.
Caroline Ellison and Gary Wang are the other Alameda and FTX executives to be charged in connection with FTX’s multibillion-dollar collapse. They pled guilty to several fraud charges and are reported to be cooperating with the investigation.
Concerns have been raised about the future of approximately 55 million Robinhood shares, reportedly purchased by FTX using a loan from Alameda. SBF has tried to access these shares to cover legal costs, while Robinhood has announced its intent to repurchase them.
The ongoing trial, which is expected to last for several years, has cast uncertainty over Bankman-Fried’s future. In the meantime, the crypto community continues to feel the effects of the fallout from the saga.
Written by Emi Lacapra