From $26 Billion to Nothing: The Rise and Fall of SBF and FTX - Decipher

From $26 Billion to Nothing: The Rise and Fall of SBF and FTX – Decipher

In short

  • The estimated fortune of FTX founder Sam Bankman-Fried has fallen from $16 billion earlier this week to virtually nothing, according to a report.
  • The crypto exchange faced a liquidity crunch and allegedly misused customer funds to make up for trade losses.

Among The collapse of FTX this week, Founder and CEO Sam Bankman-Fried (SBF) quickly went from a crypto industry icon and would-be “savior” to an ignominious figure, responsible for customer losses worth billions of dollars. dollars. And he apparently lost his entire fortune in the process as well.

BloombergBillionaires Index reports that Bankman-Fried assets have fallen from $16 billion at the start of the week to virtually nothing now, following news of FTX filed for bankruptcy today. Bloomberg believes most of his assets were tied to the companies, though he may have additional holdings that he doesn’t track.

SBF’s sizable crypto fortune was valued at $26 billion last spring, before the the market has gone down. Bloomberg described this week’s personal loss as “one of the greatest wealth destructions in history.”

FTX would have a multi-billion dollar hole in its balance sheet. The the exchange is alleged used client funds to cover losses of SBF’s trading company, Alameda Research, before experiencing a liquidity crisis this week as users withdrew funds and sent the value of FTX’s FTT token crashes. SBF stepped down as CEO today alongside the filing announcement.

The climb

Bankman-Fried founded Alameda in 2017, profiting greatly from arbitrage trading strategies before founding FTX in 2019. His profile began to rise in 2020, as he was touted as a “crypto savior” to help SushiSwap after the founder of this decentralized exchange (DEX) fled and left the community stranded.

FTX grew gradually until early 2021, but its profile and trading volume accelerated significantly as the company began to woo the general public through sports alliances and celebrities. Within months, FTX had sponsored the Miami Heat arena in a 19-year, $135 million deal, as well as esports club Team SoloMid in a pact of 210 million dollars over 10 years.

Star athletes like Tom Brady, Steph Curry, and Naomi Osaka joined, appearing in FTX commercials and endorsing the crypto to a growing audience. FTX’s Super Bowl commercial this year with comedian Larry David only reinforced this thrust.

Along the way, the company has raised vast cash from investors: a $1 billion Series B in July 2021, an additional $421 million in October 2021, and $400 million more last January. This does not include fundraising for FTX US, a separate exchange serving the United States. FTX was valued at $32 billion during its last increase in January.

In the spotlight

SBF’s net worth and fame both grew along the way, and soon after, he was estimated to have a fortune of $26 billion. He celebrated his success by hang out on stage with Brady and model Gisele Bündchen, Brady’s then-wife, at FTX’s own Crypto Bahamas conference, which also featured the likes of Bill Clinton and Tony Blair.

Bankman-Fried subscribes to the theory of effective altruism, essentially trying to earn as much as he could through FTX and crypto trading to ultimately give his all and benefit the world. He also said he could spend up to $1 billion on political donations in the run-up to the 2024 presidential election, but ultimately backtracked on this statement.

And when the crypto industry stumbled earlier this year, he stepped in very publicly to “bail out” insolvent companies like Voyager Digital and BlockFi that were exposed to UST and LUNA from Terra.

In August, SBF declared the Decrypt‘s gm podcast that bailing out Voyager Digital was probably “$70 million down the drain.” He was nonchalant about bailing out Voyager and didn’t seem to expect the funds to be returned. never be,” he said. Decrypt.

These companies now don’t have much recourse and their leaders may wish someone else had stepped in instead.

SBF’s nonchalance might have hit some like a red flag then. But Bankman-Fried was worth billions and framed the $750 million he gave away bailouts earlier this year at Voyager and BlockFi as part of his “responsibility” as a cryptography officer.

“I think we have a responsibility to seriously consider intervening, even if at a loss to ourselves, to stem the contagion,” Bankman-Fried previously said. NPR. “Even though we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.

The fall

Behind the scenes, however, reports allege he was improperly using FTX client funds to stem the bleeding at Alameda. However, when FTX customers started withdrawing assets en masse and the FTT token crashed, the company found itself in a liquidity crunch. Rival exchange Binance nearly stepped in to save the day, but changed course when he saw the extent of the mess.

Now, FTX and its affiliates have filed for bankruptcy, and SBF’s estimated net worth has plummeted as a result. Bankman-Fried says he’s “really sorry” for the whole mess, but Crypto Twitter didn’t have it. Neither do FTX users.

Client assets potentially worth billions of dollars are now largely trapped in the exchange and could be locked in bankruptcy proceedings for a very long time. On top of that, companies around the world…including BlockFi– reveal the extent of their exposure to FTX, spreading the kind of crypto contagion that SBF previously aimed to thwart.

Bankman-Fried and FTX are under investigation by at least five different US regulators: Security and Exchange Commissionthe Department of Justice, the Commodity Futures Trading Commission, the Texas State Securities Commissionand California Department of Financial Protection and Innovation.

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