SAM Bankman-Fried, more popularly known as SBF, made history of sorts when in a matter of days in November, this Crypto Wonder Boy, this JP Morgan of the crypto space, fell from a net worth of $26 Billion to zero, bringing down with him several huge companies and more than a million individual investors around the world.
At the outset, I thought Bankman-Fried's story could rival the plots of Hollywood movies but as his narrative developed, it has become evident that Sam's story is too grotesque and insufferable that many wonder how he was able to pull a fraud this big in 2020's America.
At 30 years old, SBF built a formidable financial empire that he based in the Bahamas presumably to evade the fine teeth of US regulatory bodies.
Sam's slide from a billionaire owner of FTX and Alameda Research, cryptocurrency leaders which were touted to be worth $32 billion, started on Nov. 2 when CoinDesk published an article on Alameda's balance sheet, pointing out alleged discrepancies.
FTX is the second biggest crypto exchange in the world, with Binance as the leader.
On Nov. 6, Binance's Changpeng Zhao, popularly known as CZ, liquidated all his FTT token holdings, presumably as a reaction to the expose. But the next day, Nov. 7, SBF Tweeted "FTX is fine" although withdrawals from clients had started to mount.
Sam was exposed to be lying when on the next day, Nov. 8, his FTX exchange halted withdrawals. As FTX needed some $5 to $8 B to boost liquidity, SBF and CZ started to discuss a lifeline rescue plan, with Binance proposing to its biggest competitor a non-binding takeover offer, subject of course to the usual due diligence (DD).
On Nov. 9, after a day of studying FTX's financial statements, Binance backed out of the FTX deal, in another Tweeter announcement. Within seconds, FTX reaped a deluge of withdrawals, inquiries, complaints, and invectives, which lasted the whole day and night of Nov. 10.
On Nov. 11, FTX files for Chapter 11 bankruptcy in a New York court, and Sam resigned as FTX chief executive officer, bringing down with him the FTX-Alameda House of Cards, creating billions of dollars in losses for unsuspecting investors and clients, and leaving the crypto industry with scars so deep it might take years to heal.
SBF's rise to prominence and riches is legend in the world of American business, media, and politics. He convinced top players in Silicon Valley to back his projects with millions of dollars in venture capital, and with this, Bankman-Fried established Alameda Research, a hedge fund which grew like a balloon being filled with air, and appointed there as CEO his girlfriend Caroline Ellison, 24, who is enamored with amphetamines, costume parties and Harry Potter, with little knowledge and experience in the financial world.
A big part of why Sam was given the adulation and trust by otherwise conservative American investors, many of them institutions, is that he has taken on an image of being a philanthropist, a big contributor to the Democratic Party ($40 million to President Joe Biden's presidential campaign, second only to George Soros), important advertiser and supporter of the Super Bowl and other sports, a partner of the World Economic Forum, and the savior of failing crypto companies.
(To be continued)