Sam Bankman-Fried: A crypto king on the brink

It happened on a hot July day in 2021 that a group of investors from the American venture capitalist Sequoia met with a young crypto entrepreneur for a zoom call that had been convened at short notice. It was Friday afternoon and the majority of the participants had little desire to clear their jam-packed schedules for the call. But when the young entrepreneur began to talk about his plans, all doubts were gone.

In a relaxed, detached tone, as one participating employee later reported, his boss talked about the super app he had in mind: “FTX should be a place where you can do whatever you want with your dollars. You can buy Bitcoin. You can send money to your friends in any currency. You can buy a banana.” The investors were enthusiastic: “I LOVE THIS FOUNDER!” wrote one in the zoom chat, “10 out of 10” another.

Satisfied with the way the conversation went, the crypto entrepreneur’s employee walked over to his desk – and found that his boss had apparently played the whole investor call about the online strategy game “League of Legends”.

At least that’s what he later told journalist Adam Fisher, who incorporated the scene into a profile on Sequoia’s website. The parallel gambling apparently had no influence on the success of the conversation: In the financing round in which the call took place, the crypto exchange FTX collected one billion dollars. Today, a little over a year later, the company is on the brink. And with it its founder: Sam Bankman-Fried, better known as SBF.

The Deep Fall of a Crypto Star

Just a few days ago, the 30-year-old was considered a crypto guru, the “messiah” of the industry. Now he is likely to go down in history as the billionaire on the Bloomberg index who has suffered the biggest daily loss to date: With the sinking of FTX, Bankman-Fried is said to have lost 95 percent of his wealth, almost $15 billion.

It’s the deep fall of a superstar who has enjoyed a rapid rise over the past five years. In March of this year, Bankman-Fried met with Goldman Sachs CEO David Solomon, and in May he hosted a conference with participants including Bill Clinton, Tony Blair, Katy Perry and Tom Brady.

SBF always said he was never concerned with fame and influence. Instead, he had one goal in everything he did: to get as rich as he could, and then donate the money.

Utilitarianism determines all his actions

Sam Bankman-Fried was born on March 6, 1992 to Stanford law professors Joseph Bankman and Barbara Fried. He and his siblings were raised utilitarian: How can we achieve the greatest possible overall benefit for humanity through our actions? The family discussed questions like these over dinner. SBF should align his whole life with it.

From 2010 to 2014 he studied physics at MIT in Boston. In the summer of 2013, he completed an internship at Jane Street Capital, a trading firm in New York’s Financial District that deals in exchange traded funds. He was one of the few interns who were subsequently brought back for a full-time position.

He was quickly recognized as one of the best traders at Jane Street, he was so good that others came to his work place to watch youngsters beat the best gamers online on Twitch. He donated half of his income, mostly to Effective Altruist organizations, which he joined as a student. The global movement has set itself the goal of using resources such as time and money as effectively as possible to alleviate suffering in the world.

But at 25, just as his career was really picking up speed, SBF had a life crisis. He felt good at Jane Street, and while the job was secure, he felt he wasn’t doing everything he could to fulfill his utilitarian goals. He realized that in order to do as much good in the world as possible, he had to get as rich as he could. He quit his job at Jane Street and moved back to his home in the Bay Area of ​​California, not really knowing what to do next.

High profits beckoned in crypto trading

In 2017, everyone in the tech-focused Bay Area was talking about crypto. Bankman-Fried began to deal with the new technology – and made a discovery: In Japan and Korea, cryptocurrencies were sometimes traded at significantly higher prices than in the USA. A situation that promised enticingly easy profits: the kimchi premium, named after Korea’s signature pickled cabbage.

SBF got to work. He spent the coming months moving digital crypto units back and forth between the US and Japan day and night. He made millions from trading and founded his first company: Alameda Research. At that time, SBF could only exchange tokens on two crypto exchanges, Coinbase and Binance. While Coinbase boasted of working closely with U.S. regulators, Binance did the opposite, constantly changing its domicile to avoid regulations. Neither seemed ideal to SBF, which is why he founded the crypto exchange FTX in April 2019 – at least that’s the founding myth. The company was initially based in Hong Kong, then in the Bahamas.

The timing could not have been better: Shortly after FTX was founded, the spectacularly steep increase in value of cryptocurrencies such as Bitcoin began, SBF and its co-founders were able to ride the wave of success. Within a very short time, FTX became one of the largest crypto exchanges in the world, with venture capitalists investing a total of $40 billion in the company. Football player Tom Brady and his wife Gisele Bundchen are said to have put $650 million into FTX.

A fundraiser that hadn’t started yet

For SBF itself, things initially only went in one direction: upwards. At his peak, Forbes valued his fortune at $26.5 billion, made up largely of his stakes in FTX and trading arm Alameda Research, as well as the FTT tokens his exchange issued itself. With his relaxed, charismatic manner, SBF quickly became the darling of the scene – and a brand. He always walked around in shorts and a T-shirt and was considered hardworking and modest. On busy days, he reportedly slept on a beanbag next to his desk.

Sam Bankman-Fried has always pledged to donate most of his fortune over the course of his lifetime. In the last presidential election, he supported Joe Biden’s campaign with $5.2 million. But in April of this year, “Bloomberg” wrote that SBF had so far donated its money less to charity than simply spent it: for example for the naming rights to the Miami Heat basketball team’s arena ($135 million) or the broadcast of a Super Bowl -Commercials starring comedian Larry David ($30 million). SBF himself then said that he was still increasing his money in order to donate it at a later date.

Now the issue should be settled. His fortune, which was last down to an estimated $15.2 billion, collapsed so much on Wednesday that SBF was even kicked out of the Bloomberg Billionaires Index. He turned down an interview request from the NZZ – he is probably spending day and night in the office again at the moment.