FTX Founder SBF The Astonishing Fall of the Former Cryptocurrency King

SBF The Dramatic Downfall of FTX's Founder - From Cryptocurrency King to Astonishing Defeat

In the development process of a new technology, there is always a moment when hype becomes so pervasive that it is taken for granted. Lawyers, accountants, and regulatory bodies are nowhere to be seen. Investors insist on entrepreneurs taking their money. The world trembles on the edge of transformation.

For internet companies, this moment was 1999. For artificial intelligence, it was over nine months ago. For cryptocurrencies, it was 2017.

Six years ago, Sam Bankman-Fried (SBF) knew little about alternative currencies. But he accurately predicted that by capturing only a small portion of the millions of cryptocurrency transactions, he could seize a huge business opportunity. In no time, his net worth soared to $23 billion, earning him admiration. Only Mark Zuckerberg has accumulated such wealth at such a young age.

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Compared to Bankman-Fried, Zuckerberg, the co-founder of Facebook, has faced criticism, but he is like Thomas Edison in comparison. After a swift trial in the Manhattan federal court, Bankman-Fried, now 31 years old, once the king of cryptocurrencies, was found guilty of seven counts of fraud and conspiracy, involving his companies FTX and Alameda Research.

Bankman-Fried was once close to celebrities and influential figures, distributing plundered wealth to politicians and himself, touted as the next Warren Buffett. He employed his friends, making them instantly wealthy, and the news media even published his most mediocre statements with great enthusiasm. For a while, everyone liked Sam Bankman-Fried—except Sam Bankman-Fried himself, apparently.

“I’m sad, and I’ve been sad for most of my adult life,” Bankman-Fried stated in his closing testimony, which he had hoped to submit to Congress last winter, before his arrest disrupted his plans. But his words revealed some truth.

In photos from his heyday, Bankman-Fried always appeared awkward and embarrassed, as if he would rather be playing video games, even when he was being embraced by Gisele Bündchen. Everyone insisted that he was very intelligent and an entrepreneur who could shape the future. Perhaps only he knows if that’s true.

As journalists – and now prosecutors – have pointed out, FTX and Alameda are run by a group of unfortunate young people who lack the necessary skills, maturity, or patience. Those who truly have ethical boundaries and realize that something is amiss quickly leave, leaving behind a core team that is swept up in trouble – or perhaps plunged headfirst into trouble.

“When I started working at Alameda, if you had told me that I would send false balance sheets to our lenders or take clients’ money, I don’t think I would have believed it, but over time, I became more accustomed to these things,” testified Caroline Ellison, a colleague and former girlfriend of Bankman-Fried, in the trial.

When Ellison started working at Alameda, something called blockchain was somehow changing everything. Silicon Valley invested billions of dollars in the cryptocurrency field, looking for early adopters like Bankman-Fried who appeared to be smart.

红杉资本is a top-tier venture capital firm that has provided funding for Apple, Airbnb, Instagram, and WhatsApp. In the frenzy of the emerging cryptocurrency market, it was practically begging Bankman-Fried to accept its funding. So the founder of FTX accepted. Redwood subsequently commissioned veteran Silicon Valley writer Adam Fisher to write a long piece of praise for Bankman-Fried. Fisher fell deeply in love with Bankman-Fried, whom fans dubbed SBF.

“After interviewing SBF, I’m convinced: I’m talking to a future billionaire,” Fisher wrote. He added, “What is FTX’s competitive advantage? Ethical behavior.”

Less than two months after the interview was published, FTX collapsed. Redwood Capital wrote a sentence at the beginning of this article saying it was an “unexpected twist”. It later retracted the article and wrote off its $214 million investment in FTX. Redwood Capital and Fisher declined to comment on this article.

The core myth of Silicon Valley is that technologists are here to save the world. If they make a lot of money in the process, it only proves how great their ideas were in the first place.

This was the allure of Elizabeth Holmes and her blood-testing company Theranos. She was young, feminine, charming, and looked great on magazine covers. But the concept that truly propelled her to fame and fortune was that she was a high-tech version of Florence Nightingale, tirelessly improving medical technology to improve people’s health. (In reality, her technology didn’t work, providing customers with unreliable diagnostic results and exposing them to risk.)

FTX allows people to bet on cryptocurrencies. Essentially, it’s a casino. Even the most empathetic journalists find it difficult to portray a casino as a savior of humanity, so these reports always focus on Bancman-Fried himself.

He calculates the probability of everything – he believes he has a 5% chance of becoming the President of the United States. He thinks he can help humanity by making a lot of money and then donating it all, a philosophy called effective altruism. The details don’t matter. As Forbes wrote in a 2021 profile that praised him, “He’s a profit-oriented person, solely focused on making as much money as possible (he doesn’t care how), all with the intention of giving it away (he doesn’t know when or to whom).”

During the trial, it was revealed that Bancman-Fried spent $15 million on private plane travel. He never hid the fact that he and some FTX friends live in a penthouse apartment worth $35 million. If these young people truly embraced the teachings of effective altruism, shouldn’t they be sleeping on the beach rather than living a luxurious life? It seems that no one has ever asked this question.

Bancman-Fried is happiest when playing video games. Whenever he has time, he plays games. While discussing his grand plan with Sequoia over Zoom – to develop a financial super app within FTX that would eliminate all banks in the world – he was also playing League of Legends.

He repeatedly expresses contempt for his own actions, seemingly pleading with the authorities to conduct a more thorough investigation of his company. For example, in an interview in August 2021, he said, “If we do something that regulators don’t want to see, you don’t have to sue us. Just reach out and let us know what you want.”

During the early days of prosperity, the magic of starting a company was the low barrier to entry. According to its profile, when Sequoia Capital was looking for a cryptocurrency exchange to invest in, FTX was “the perfect blonde bombshell.” One important reason was “no concerted attempt to evade the law.” It’s hard to find a lower standard than that.

Bancman-Fried tried to warn everyone.

In May 2022, he told the Financial Times, “In terms of the number of Ponzi schemes, the cryptocurrency field has far more per capita than any other field.”

Doesn’t matter. Investors, clients, journalists all saw the genius they were told about. And if they had the slightest doubt, Bancman-Fried had an ace up his sleeve: both his parents are law professors at Stanford University.

“Both of his parents are compliance lawyers,” said Kevin O’Leary, the host of the reality show “Shark Tank.” O’Leary is both a spokesperson for FTX and an investor in the company. “If there’s one place I can go and not get in trouble, it’s FTX.”

O’Leary may not know that his parents – tax law expert and clinical psychologist Joseph Bankman and retired Stanford Law School professor Barbara Fried – have shifted their focus elsewhere. According to a lawsuit filed by bankrupt FTX, their son gave them a $16 million Bahamian residence, $10 million in cash, and many other things through FTX. The couple’s lawyers called these claims “completely false.”

In a passionate introduction in Redwood City, Bankman-Fried said, “I’m very skeptical of books. I don’t want to say that any book is not worth reading, but this one is definitely very close to my thoughts.” He also doesn’t like movies.

When reading the tragic story of Bankman-Fried, it’s impossible not to think that if Bankman-Fried and many others around him spent less time at math camp and more time in English class, their fate would be much better. In some books, characters find their moral compass; readers can find theirs in the best books.

As I read Bankman-Fried’s story, my mind kept drifting to the historical film “A Man for All Seasons,” which was once a must-watch for high school students. It tells the story of a man who knows right from wrong, and a man who doesn’t. Richard Rich is a bit like Bankman-Fried – an ambitious, unscrupulous young man. He pleads with Thomas More for a position in the court. More tells Rich that he could be a good teacher.

“And who would know that?” sneers Rich.

“You, your students, your friends, God,” More replies. “That’s not too few.”

Rich rejects a peaceful life, betrays More, and gains a position in Wales. The audience can feel that he has lost his soul. Bankman-Fried rejects a peaceful life, betrays almost everyone he knows, and ultimately gains neither wealth nor a position in Wales.

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