Sam Bankman-Fried's Sudden Change From White Knight To Wash

Sam Bankman-Fried’s Sudden Change From White Knight To Wash

Nov 11 (Reuters) – Sam Bankman-Fried earned a reputation as a savior of the crypto industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and ran until Friday, needed a lifeline, none came.

Until this week, the 30-year-old American was considered a digital asset darling who amassed billions in personal wealth by operating one of the biggest crypto platforms in the world. But as traders rushed to withdraw funds from FTX, Bankman-Fried was in denial and told investors he was confident the company would be saved, according to a source familiar with the matter. On Friday, FTX filed for bankruptcy. He apologized several times.

“Nobody was saying something was wrong with SBF,” said Marius Ciubotariu, co-founder of Hubble Protocol, a decentralized lending platform. The company’s collapse took markets by surprise, as Bankman-Fried was seen as a business-savvy founder and adept at the deals struck, he said.

Known in financial circles by his initials, SBF, Bankman-Fried had become a prominent and unconventional figure in the industry. He wore his signature wild hair, t-shirts and shorts in group appearances with statesmen like former US President Bill Clinton and former UK Prime Minister Tony Blair, as well as model Gisele Bundchen . Bankman-Fried also quickly became one of the biggest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.

The crypto prodigy began his career at Jane Street Capital, a choice he says was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize charitable donations.

He amassed a fortune, estimated at $26.5 billion by Forbes a year ago, by taking advantage of bitcoin price differentials in Asia and the United States. Bankman-Fried eventually launched crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion.

The collapse of FTX caused bitcoin to plunge to a two-year low this week on fears that the company’s woes could spread to other crypto companies. Employees were blindsided by his meltdown, with some sending apology notes to customers expressing shock at what had happened, according to a person familiar with the matter.

FTX on Friday named John J. Ray III, a restructuring expert, as CEO. He oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.

“A lot of people compared it to Lehman – I would compare it to Enron,” former Treasury Secretary Larry Summers said in a Bloomberg TV interview.

Despite all of his recent celebrity endorsements, notoriety, and big-name backers, Bankman-Fried wasn’t confident about FTX’s prospects in his early days.

“I thought we would fail,” Bankman-Fried said at a conference in June weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.”

Reporting by Hannah Lang in Washington; additional reporting by Anirban Sen in New York; Editing by Lananh Nguyen and Stephen Coates

Our standards: The Thomson Reuters Trust Principles.

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