The Life and Crimes of SBF

2022 was a year filled with cryptocurrency disasters with the lowest point arguably being the FTX bankruptcy. Once touted as crypto’s wonderboy, FTX founder Sam Bankman-Fried quickly became a pariah in the crypto world after his exchange was found to be defrauding investors. Many have wondered how this once lauded enterprise – promoted by the likes of Tom Brady and Larry David – could’ve swindled so many; and who the man behind it all really is.

Who is Sam Bankman-Fried?

Sam Bankman-Fried (SBF) is a computer scientist and entrepreneur from Stanford, California. Born and raised in Palo Alto, CA, SBF went on to attend MIT, graduating with degrees in mathematics and computer science. 

Before establishing his cryptocurrency businesses, Sam created software for trading at Jane Street Capital and Optiver Asia Pacific. Upon leaving these jobs, his interest shifted toward investing in cryptocurrencies and he started buying bitcoin in December 2013. By April 2014, he had become an active trader in the digital currency markets.

In 2018 Sam founded FTX exchange, which quickly established itself as one of the leading exchanges in the cryptocurrency world. The success of FTX led him to create Alameda Research which used sophisticated trading strategies to generate profits in the cryptocurrency markets.

It was around this time that SBF became a believer in “effective altruism”, the philosophy that making millions of dollars is ethical if it is put to philanthropic use. Unfortunately, it turned out that SBF was anything but ethical and engaged in business practices that were anything but philanthropic.

FTX bankruptcy

FTX was seen as a robust cryptocurrency exchange until late 2022 when it was revealed that Alameda Research’s balance sheet was carrying $14.6 billion of equity in FTX’s own token, FTT. This raised alarm bells for many, including the world’s largest crypto exchange, Binance, which quickly sold off its FTT tokens on Nov 6, 2022. In the wake of Binance’s sell-off, the market followed suit, selling $6 billion of FTT. 

By Nov 8, the price of FTT had dropped from $22 to $3.15 and SBF had deleted some possibly incriminating tweets. Over the next three days, Alameda’s website went down, and SBF had his assets frozen by Bahamian authorities; he then resigned as CEO and filed FTX for bankruptcy. 

In the aftermath, it was estimated that FTX was holding around $9 billion in liabilities against $900 million in assets. All in all, investors lost about $21 billion, and SBF’s personal net worth dropped from $16 billion to $900 million in less than 24 hours. 

What did SBF do?

While promoting FTX at events like Davos and Crypto Bahamas, SBF was diverting investor funds to Alameda Research to be reinvested into the crypto markets. In other words, he illegally mixed monies between his companies in order to trade for profit in the market.