NEW YORK — Sam Bankman-Fried has received countless accolades for quickly achieving superstar status as the the head of the crypto exchange FTX: the savior of crypto, the newest force in Democratic politics and potentially the world’s first trillionaire.
Now, comments about 30-year-old Bankman-Fried are no longer kind after FTX has filed for bankruptcy protection Sixth, make investors and his customers and many others in the crypto world feel cheated fear the consequences. Bankman-Fried himself could face civil or criminal charges.
“Sam, what did you do?” tweeted Sean Ryan Evans, host of the Bankless crypto podcast, after filing for bankruptcy.
Under Bankman-Fried, FTX quickly became the third largest exchange by volume. The startling fall of this fledgling empire has created tsunami-like waves in the crypto industry, which has seen a lot of volatility and turmoil this year, including the sharp drop in the price of bitcoin and other digital assets. To some, these events are reminiscent of the domino-like failures of Wall Street firms during the 2008 financial crisis, especially now when so-called healthy companies like FTX is failing.
A venture capital fund has written down investments in FTX worth over $200 million. Cryptocurrency lender BlockFi halted customer withdrawals on Friday after FTX filed for bankruptcy protection. Singapore-based Crypto.com exchange saw an increase in withdrawals this weekend for internal reasons but some of these actions could be attributed to the rough tension from FTX .
Bankman-Fried and his company under investigation by the Department of Justice and the Securities and Exchange Commission. Investigations could focus on the possibility that the company may have used customer deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research, in violation of US securities laws. .
“This is a direct result of a scammer breaking all the fundamentals of financial responsibility,” said Patrick Hillman, chief strategy officer of Binance, FTX’s biggest competitor. Early last week Binance appear ready to enter to rescue FTX, but withdrew after reviewing FTX’s books.
The ultimate impact of FTX’s bankruptcy is uncertain, but its failure will likely lead to the destruction of billions of dollars in assets and cast even more skepticism toward cryptocurrencies in the coming years. the time when the industry can use the vote of confidence.
Cory Klippsten, CEO of Swan Bitcoin, said: “I care because retail investors are the biggest losers and because so many people still misassociate bitcoin with the ‘cryptocurrency’ space ‘scam,’ said Cory Klippsten, CEO of Swan Bitcoin, who for months has raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long been deeply skeptical of its parts. other of the crypto universe.
Bankman-Fried founded FTX in 2019 and it has grown rapidly — it was recently valued at $32 billion. The son of Stanford University professors who are known to play the video game “League of Legends” in meetings, Bankman-Fried has attracted investment from the highest levels of Silicon Valley. .
Sequoia Capital, which invests in Apple, Cisco, Google, Airbnb and YouTube, describes its meeting with Bankman-Fried as potentially “conversing with the world’s first trillionaire.” Some of Sequoia’s partners became enthusiastic about Bankman-Fried after a Zoom meeting in 2021. After several more meetings, Sequoia decided to invest in the company.
Adam Fisher, a business journalist who wrote a profile on Bankman-Fried for the company, referred to Bankman-Fried by his famous online moniker. The article, published in late September, has since been removed from Sequoia’s website.
Sequoia recorded a reduction of its $213 million investment to 0. An Ontario, Canada-based pension fund also reduced its investment to zero.
In a brief statement, the Ontario Teachers Retirement Fund said, “Naturally, not all investments in this early-stage asset class work as expected.”
But until last week, Bankman-Fried was seen as the white knight of the industry. Whenever the crypto industry is in crisis, Bankman-Fried is likely to come up with a rescue plan. When online trading platform Robinhood ran into financial trouble earlier this year — collateral damage from falling stock and crypto prices — Bankman-Fried jumped in to buy shares of the company as a support sign.
When Bankman-Fried acquired the assets of bankrupt crypto company Voyager Digital for $1.4 billion this summer, it brought a sense of relief to Voyager account holders, whose assets property has been frozen since its own failure. That rescue is now in doubt.
As the king of crypto, his influence began to spill over into politics and popular culture. FTX has purchased prominent sports sponsorships with Formula Racing and buy naming rights for an arena in Miami. He has pledged to donate $1 billion to the Democratic Party this election – his actual donations are in the tens of millions – and prominent politicians like Bill Clinton have been invited to distribute presented at FTX conferences. Football star Tom Brady has invested in FTX.
Bankman-Fried was the subject of some criticism before the collapse of FTX. While primarily operating FTX outside of US jurisdiction from its headquarters in the Bahamas, Bankman-Fried has been increasingly vocal about the need for more regulation of the crypto industry. Many crypto advocates oppose government surveillance. Now, the demise of FTX may have helped introduce stricter regulations.
One of those critics is Binance founder and CEO Changpeng Zhao. The feud between the two billionaires spilled over into Twitter, where Zhao and Bankman-Fried collectively command millions of followers. Zhao helped start the withdrawal operation that failed FTX when he said Binance would sell his stake in FTX’s FTT token.
“What (asterisk) (asterisk) doesn’t show… and that would be crypto’s fault (rather than one’s fault),” Zhao wrote on Twitter on Saturday.
