Sam Bankman-Fried earned a reputation as savior of the crypto industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and led until Friday, needed a lifeline, none was forthcoming.
Until this week, the 30-year-old American was seen as a darling in digital assets who amassed billions in personal wealth by running one of the world’s largest crypto platforms. But as traders rushed to withdraw funds from FTX, Bankman-Fried was in denial and told investors he was convinced the business would be rescued, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. He apologized, repeatedly.
“Nobody was saying that anything was wrong with SBF,” said Marius Ciubotariu, co-founder of the Hubble protocol, a decentralized lending platform. The company’s collapse caught markets by surprise because Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.
Known in financial circles by his initials, SBF, Bankman-Fried had become a prominent and unconventional figure in the industry. He sported his signature wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Bill Clinton and former British Prime Minister Tony Blair, as well as supermodel Gisele Bundchen. Bankman-Fried also quickly became one of the largest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.
The crypto wunderkind started his career at Jane Street Capital, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.
He amassed a fortune, estimated as high as $26.5 billion by Forbes a year ago, by taking advantage of the price differences in bitcoin in Asia and the United States. Bankman-Fried eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion.
FTX’s meltdown sent bitcoin plunging to a two-year low this week amid concern that the company’s woes will spread to other crypto firms. Employees were blindsided by its collapse, with some sending apologetic notes to clients expressing shock at what had happened, according to a person familiar with the matter.
FTX appointed John J. Ray III, a restructuring expert, as CEO on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.
“A lot of people have compared this to Lehman – I would compare it to Enron,” said former Treasury Secretary Larry Summers in an interview with Bloomberg TV.
For all his recent celebrity endorsements, notoriety and big-name backers, Bankman-Fried was not confident about FTX’s prospects back in its early days.
“I thought we would fail,” Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.”