Crypto Kingdom Ended in a Day: What Did FTX CEO Do?

The rise and fall of FTX CEO Sam Bankman-Fried, who became a crypto billionaire in just 4 years before losing many of his wealth in a single day and resigning from his beleaguered company.

In a week the world could turn on the contrary

Last Tuesday, Sam Bankman-Fried was a 30-year-old man with mop brown hair and influential enough to pass his initials SBF. According to Bloomberg’s assumptions, it had a cryptocurrency exchange called FTX, a trading firm called Alameda Research, with $15.6 billion to its name. Within four years, he has become one of the biggest names in the crypto world. He set his sights on mainstream finance.

Now only $1 billion and his initials remain. On Friday, FTX announced that Bankman-Fried is stepping down as CEO and will be replaced by John J. Ray III. Additionally, FTX, Alameda Research, and approximately 130 affiliated companies have filed for Chapter 11 bankruptcy. The collapse of Bankman-Fried’s fortune had been evident for months. According to The New York Times, reports have been circulating this year that FTX is on “shaky financial fundamentals” amid greater volatility in the global crypto market.

Son of two Stanford Law professors

Bankman-Fried grew up in Silicon Valley the son of two Stanford Law professors. He spent his childhood playing games such as chess and bridge.

Bankman-Fried studied physics at the Massachusetts Institute of Technology. Here he taught several extracurricular courses with his academics. Bankman-Fried said, “I worked for a total of an hour and a half and had a hard time finding a seat on time. I was a really negligent student,” she says.

He gave half of his salary to animal welfare clusters

During college, Bankman-Fried began developing his moral compass. In particular, he was interested in effective altruism, a philosophical movement that uses calculations to understand how people can use their time, money, and resources to most adequately help others.

After college, Bankman-Fried went to work for global trading firm Jane Street. That’s where she learned the art of arbitrage. According to Bloomberg, during his three years on Jane Street, Bankman-Fried gave half of his salary to animal welfare groups. Also, influential sacrifice has been spent on charities. She left to work for MacAskill’s Center for Influential Altruism, founded by William MacAskill, one of the leaders of the influential altruism movement.

The Moby Dick of crypto whales

By 2017, the cryptocurrency was booming. Humans were trading on private exchanges. Bankman-Fried noticed that some cryptocurrencies were priced higher on some exchanges than others. He realized he could use his arbitrage skills to take advantage of price gaps. By October 2017, Bankman-Fried founded his own crypto trading company, Alameda Research, in Berkeley, California. His colleagues at Alameda say he’s adept at finding ways to move faster than other traders.

According to Bloomberg, Alameda was moving about $15 million a day in mid-markets at its peak. Bankman-Fried soon earned the nickname ‘the Moby Dick of the crypto whales’ for his waves in the crypto industry. In 2018, he abruptly relocated Alameda’s roster to Hong Kong after noticing how lax the rules were compared to the US. “I think we’re losing $50,000 a day by not working in Hong Kong instead of Berkeley,” one of her colleagues told Insider.

How was FTX founded and grown?

As Bankman-Fried continued to raise money from the trade, so did his ambitions. He had fun thinking about creating an alternative to what he called the ‘sh.tshow exchanges’ he traded in mid-2017 and 2018. At the beginning of 2019, Bankman-Fried and his team were working hard to create their own crypto exchange. After four months of coding, they released FTX in May.

FTX was a victory. The platform boasted of cost-effective features such as low process prices. It also offered investors a variety of token types that they could bet on. FTX even allowed traders to exchange cash as collateral for cryptocurrencies. In 2020, Bankman-Fried also opened a small US branch of FTX. They had plans to eventually take a large stake in the US crypto market. Accordingly, he began lobbying Congress for new crypto rules several times a year. According to Politico, the pro-crypto superior PAC also donated millions to the GMI PAC. In September 2021, Bankman-Fried decided to move FTX’s operations to the Bahamas. It was only one flight from Miami, but the platform would still be able to operate outside the scope of the SEC.

FTX only takes a small deduction from each process. However, according to Bloomberg, until 2020, the platform was seeing an average of 1 billion dollars per day. According to Bloomberg, in 2021 alone, Bankman-Fried made $350 million in profits from FTX and another $1 billion from Alameda.

Major investors such as SoftBank Vision Fund, Tiger Global, Sequoia Capital and BlackRock have bet on FTX in their funding types. According to Forbes, in early 2022, FTX and its US operations were valued by investors for a total of $40 billion. According to Bloomberg, Bankman-Fried’s own net worth was at its peak of $26 billion. He devoted this wealth to sponsorships, funding political leaders, and advancing his moral agenda.

Political donations from FTX CEO

According to Politico, it suddenly emerged as a major political donor in 2020. He spent more than $10 million supporting Joe Biden’s presidential campaign. But Politico reports that Bankman-Fried made his first political donation to Democratic Senator Michael Bennet of Colorado in 2010. It spent over $40 million on campaigns in 2022, according to Federal Election Committee documents reviewed by Politico.

While the majority of his funds went towards Democratic leaders, he made donations on both sides of the political aisle. The Los Angeles Times reported $1 million to Bankman-Fried’s Senate Majority PAC and $6 million to the House Majority PAC. According to Politico, as the main funder of Protection Against Pandemics, a nonprofit organization run by his brother Gabe, Covid-19 has made prevention a top priority.

A simple life, precious agreements…

Bankman-Fried said her donations are to advance her belief in effective sacrifice. He told Bloomberg that he would eventually keep just 1% of his income, or at least $100,000 a year. His easy lifestyle also follows influential ideas of sacrifice. He drives a Toyota Corolla, lives with roommates, and is vegan.

It also poured money into flashy corporate sponsorships. According to Bloomberg, the most notable is obtaining the naming rights for the Miami Heat arena, which will cost $135 million over 19 years. According to Bloomberg, he spent nearly $30 million running an ad with comedian Larry David at the 2022 Wonder Bowl. Bankman-Fried also made agreements with major basketball teams, including the Washington Wizards and Golden State Warriors, through FTX. FTX has also made agreements with individual athletes such as basketball player Steph Curry and quarterback Tom Brady.

And finally: the collapse of FTX and Bankman-Fried

Bankman-Fried seemed unstoppable. Earlier in November, a balance sheet leaked that showed Alameda Research was in precarious places. The report revealed that many of Alameda’s assets are tied to FTX’s in-house token, FTT. As the broader crypto market actually faltered, traders began to worry about a sudden drop at the expense of FTT.

Changpeng Zhao, who manages FTX’s rival exchange Binance, announced that it will sell Binance’s FTT shares shortly after. However, all traders started rushing to withdraw their own holdings from the FTX platform. Bankman-Fried had no choice but to ask Binance to bail out FTX. As you follow on Wednesday, Binance abandoned the settlement. According to Bloomberg, Bankman-Fried’s own assets fell 94% and its net worth fell by nearly $1 billion. On Friday, FTX announced that Bankman-Fried is stepping down as CEO. He noted, however, that it would help the new CEO John J. Ray III ‘an orderly transition. The announcement also includes FTX, Alameda Research, and 130 additional subsidiaries filing for willing Part 11 bankruptcy.

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