The collapse of a $32 billion cryptocurrency exchange, FTX, has elicited public scrutiny about the company’s operations under its founder and former CEO, Sam Bankman-Fried. This event dealt a heavy blow to the crypto space in 2022. But as this once-celebrated executive is now in the harsh light of indictment for multiple allegations, it may interest you to know about his life.
The Background Of Sam Bankman-Fried
Sam Bankman-Fried, often called “SBF”, was born in 1992 the United States. He was raised in Palo Alto, California, near Standford University, where his parents, Joseph Bankman and Barbara Fried, were law professors.
He attended Canada/USA Mathcamp – a summer program for high-flying high school students in mathematics, where he had an excellent academic performance. SBF did spend his leisure time playing video games like the League of Legends and the card Magic: The Gathering.
Sam-Bankman-Fried graduated from the Massachusetts Institute of Technology (MIT) in 2014 with a bachelor’s degree in physics and a mathematics minor. During his academic year at the institution, he lived in a coeducational group home called Epsilon Theta. This community promotes itself as an alcohol-free place for activities like square dancing, board games, and debating logic problems.
The Career Of Sam Bankman-Fried
SBF started his career journey in 2013 by working as an intern at Jane Street Capital, a data-driven trading firm, where he continued to work after graduating from MIT. He later went on to stint in 2017 at the Centre for Effective Altruism (CEA) as the development director.
The former FTX CEO had his first company in 2018 by co-founding Alameda Research, a quantitative trading firm. He traded at this company for three (3) years and garnered about 90% of Alameda Research by 2021.
Sam Bankman-fried, 25, 2018 also had a foray into the crypto space. He discovered a crypto arbitrage trade that has the potential to yield huge returns. At that time, Bitcoin traded 10% higher in Japan than in the United States. So, if SBF could buy large amounts of BTC in the United States and sell them in Japan, he could make a massive profit.
In partnership with some of his friends at Alameda Capital, he could move as much as $25 million in Bitcoin daily. Bankman-Fried made so much money from the arbitrage that he moved to Hong Kong and established FTX.
The birth of FTX as an exchange for the buying and selling of cryptocurrency generated huge revenue by charging customers trading fees and selling FTX-token (FTT) on the platform. By July 2021, a $900 million round put the value of the crypto exchange at $18 billion. This valuation also rose to $25 billion after a few months.
In January 2022, FTX saw its value soar to a staggering $32 billion – enhancing the wealth of Sam Bankman-Fried. This was just after he earned a spot in the Forbes 30 Under 30 as one of the world’s richest, with a net worth of over $20 billion.
Bankman-Fried was touted as the “King of Crypto” due to the tremendous success that FTX has recorded over the short space of its establishment. He became a frequent public advocate and private lobbyist in favor of the United States rules regulating the crypto industry. He was even helpful in bailing out other ailing crypto firms.
The Conviction Of Sam Bankman-Fried
Bankman-Fried started to meet his Waterloo following a publication by CoinDesk, which discovered a significant portion of Alameda Research’s assets consisted of FTT. Since this token cannot be exchanged for cash, the report elicited concerns about the capital reserves at Alameda Research and, in turn, FTX.
In the turn of events, Changpeng Zhao, the former CEO of Binance, decided to sell all the company’s holdings in FTT – totaling $580 million worth of the token. This major exit from a crypto heavyweight like Binance triggered a broad selloff, as FTX users pressured the firm to enable them to withdraw their funds.
There was turmoil in the crypto market as the decision of Changpeng Zhao caused a fall in the price of FTT and other crypto assets. FTX started facing a liquidity crisis and later declared bankruptcy on November 12, 2022, with $8 billion of customer funds unaccounted for.
He was arrested on the same day by the Royal Bahamas Police Force at his home in the Bahamas. SBF was later extradited to the United States to face criminal charges leveled against him. His trial began on October 3, 2023, at the Manhattan federal court, a case of the United States vs. Bankman-Fried.
During the course of his trial, one of the major people who testified against Bankman-Fried was his girlfriend, Caroline Elisson, who is also the former CEO of Alameda Research. She gave a stunning and detailed account of how the duo committed crimes like fraud and money laundering to defraud FTX customers and investors, as well as Alameda’s lenders.
Elisson claimed that using FTX customer funds to cover Alameda’s shortfall was SBF’s idea, as he repeatedly directed her to repay their loans. In the end, she pleaded guilty to wire fraud and conspiracy charges for her role in FTX and Alameda’s crash.
Sam Bankman-Fried was found guilty of stealing $8 billion from the customers of his now-bankrupt company. He was convicted on all seven (7) counts of fraud and conspiracy at the end of his trial on November 2. 2023. But his sentencing hearing is slated for March 28, 2024.
Although this may not have been one of the biggest crypto scams in history, according to United States Attorney Damian Williams, Bankman-Fried carried out one of the biggest financial frauds in American history.
Frequently Asked Questions About Sam Bankman-Fried
Who Is Sam Bankman-Fried?
Sam Bankman-Fried is the founder and former CEO of the collapsed FTX exchange.
Has Bankman-Fried Faced Trial And Found Guilty For Fraud?
Yes, Bankman-Fried has been found guilty of fraud and conspiracy at the end of his trial. His sentencing hearing is scheduled for March 28, 2024.
How Much Did Bankman-Fried Steal From FTX Users?
SBF stole $8 billion of FTX users’ funds and channeled them into living extravagantly and donating to institutions and politicians.
Conclusion
There is no doubt that Sam Bankman-Fried has a grace to grass experience as a one-time crypto king and is now in the eye of the storm for stealing its now-defunct FTX users’ funds.
While he awaits his sentencing hearing, we must remind ourselves of the regulating challenges the crypto market is still facing. Hence, there is a need to research a token or an exchange before putting your funds into it.
