Sam Bankman-Fried, from triumph to collapse. This is how the 30-year-old genius of cryptocurrencies failed

From empyrean to hell in a week. The $ 32 billion cryptocurrency empire created by 30-year-old industry celebrity Sam Bankman-Fried, known as SBF, went up in smoke within seven days. It all started on November 2, when an article in the online magazine Coindesk raised doubts about the risks associated with the solvency of Bankman-Friedin’s company in the event of a collapse in the value of FTT, the token of the FTX exchange. On Sunday 6 November, the question and answer between Sbf and Changpeng Zhao (known as Cz), the CEO of rival Binance, is staged on Twitter. One message, in particular, has been judged harsh by the markets and is the one in which Cz evokes the case of Luna, the token of the Earth ecosystem linked to the Ust stablecoin that failed last spring. “Liquidating our FTTs is just post-exit risk management, we learned from Luna,” wrote Changpeng Zhao. The collapse of FTT, resulting in customer fleeing and a rush to withdraw deposits, completed the disaster. Cz launched a bailout by proposing to take over Ftx, Bankman-Fried’s company, only to give up, explaining that “the problems are beyond our control and our ability to help.” Among industry experts, the bankruptcy of the SBF company is compared to the “Lehman Brothers of crypto”.

The white knight

The collapse of Ftx is a severe blow to the company and especially to its founder Sam Bankman-Fried, who until recently was hailed as a “white knight” and associated with billionaire Warren Buffett or Jp Morgan. Just two weeks ago he was still the character of the moment, sixtieth on the world list of billionaires according to Forbes, founder in 2017 of Alameda Research, a trading company focused on digital currencies, with personal assets that peaked at 26.5 billion. dollars. Then the thud. Sbf’s net worth fell 94% in one day to 991.5 million, according to the Bloomberg Billionaires Index, the largest daily decline in the history of the index. It had taken him five years to reach the top of the world, he had to make public self-criticism on Twitter: «I made a … ta and I should have done better. Born in Stanford, California, the son of two law professors from the prestigious university, Sbf graduated in physics and mathematics from MIT in 2014 and traded in publicly traded investment funds before moving into cryptocurrency trading. at the end of 2017. Democrat supporter, vegan, curly hair and casual clothing (he prefers t-shirts and sweatpants), at his home in the Bahamas he organized conventions attended by Bill Clinton and Tony Blair along with pop stars like Kate Perry.

Cryptographic arbitrage

In terms of lifestyle and appearance, Bankman-Fried looked more like a university student than a financial winner, so he fully represented the anti-establishment approach of cryptocurrency enthusiasts. His specialty was crypto arbitrage, which is strategies for buying cryptocurrencies at a low price and reselling them at a higher value on another list. His best move was the purchase of Alameda Research, the trading company that SBF used as a liquidity provider for the parent company. Now Ftx has declared bankruptcy, using Chapter 11 in the United States, that is assisted bankruptcy: companies that have access to this procedure are allowed to continue operating while negotiating with creditors. Sam Bankman-Fried has resigned and Alameda Research is also part of the bankruptcy procedure: he would be partly responsible for the problems of Ftx, with a debt of about 10 billion dollars. But the scenario could turn for the worse as Cyprus is considering the suspension of FTX.com’s license, which has only been in effect for two months, which authorizes the platform to operate across the European Union. “Many have compared it to Lehman. I would compare it to Enron, ”former US Treasury Secretary Larry Summers told Bloomberg television. “The smartest kids in the room. Not just financial mistakes, but an air of fraud. Huge explosion of wealth of which no one understands where it comes from ».

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Sam Bankman-Fried, from triumph to collapse. This is how the 30-year-old genius of cryptocurrencies failed


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