THE sorry saga of Sam Bankman-Fried or SBF is a story of money, deceit, arrogance, politics, megalomania, manipulation, lies and greed. It is also the narrative of modern American society--and by extension--the global community enamored with so-called "heroes" of media, politics and business.
The belief in the outer layer of things and personalities, the images painted by media and confirmed by celebrity endorsers and influencers, have all created a convergent milieu where young people like SBF and his 9 other roommates in a Bahamas condo can dupe big investors and foist upon the business community the greatest heist in recent history.
To understand the rise of SBF, there is a need to trace his career from the very start. He is the son of two Stanford law professors and finished Physics at MIT. Graduating in 2013, he started out as a trader in Jane Street Capital, handling all gamut of trades such as stocks, options, commodities, but specializing in ETFs (exchange traded funds).
In his more than 3 years as a quant trader, Sam learned the ropes of the financial markets all over the world and became interested in cryptos when he noticed the arbitrage of Bitcoin in South Korea and Japan.
In layman's language, it goes this way: if Bitcoin (BTC) costs $110 in Japan and South Korea, it costs $100 if bought in the US.
And so Sam started buying Bitcoin in the US and selling them almost instantaneously in Asia, making quite a killing. It was reported that Sam was making $25 million--a week or a month, it was not clear--but good money just the same.
SBF's game at this time was called Kimchi Premium--a reference to the traditional Korean side dish of fermented cabbage--because the Bitcoin pricing arbitrage was most pronounced in Seoul. On good days, Sam saw that the price difference was at 60 percent, and so he bought low and sold high on the same day. Today, the price of Bitcoin on exchanges around the world is pretty much the same, so Sam's play is no longer valid.
The years 2017 to 2019 had seen the growth and popularity of crypto in the US and elsewhere. Sam saw the great opportunities for personal growth in cryptocurrencies and decided to leave Jane Street to set up his own business.
In an interview with Brendan Doherty for Forbes more than a year ago, SBF said:
"The first business was Alameda, a crypto quantum trading firm. We saw that crypto was exhibiting all the signs that there would be a lot of demand for liquidity but with very little liquidity available. Everyone on the street was talking about crypto during that time. We were seeing huge price movements and inflows which clearly pointed to a lot of people from many different countries trying to buy many different varieties of crypto currencies using different acquisition methods. Despite how big it had become, it still had only been a few months. This meant that there had not been enough time for most of the buyers globally to onboard into the crypto ecosystem."
Sam correctly noticed that in late 2018, demand for cryptos would probably outstrip liquidity, a situation that "could lead to huge spreads on the market and really good trades."
His good business sense encouraged him to establish FTX in the spring of 2019, and build it from nothing to become the 4th largest global crypto currency exchange based outside of China.
At the time of FTX's demise, it was second only to Binance in the order of magnitude among crypto exchanges, with a reported net worth of $32 billion.
SBF's FTX created its own crypto token called FTT and started to sell it to the public, with Alameda taking up much of the marketing effort.
As both mainstream and social media continued to unravel the grand failure of FTX and Alameda, experts and the general public can't help but be amazed or surprised at the extent of damage SBF and his girlfriend Caroline Ellison whom he made as CEO of Alameda Research have foisted on the industry and its believers, investors and individual retail traders.
In the US alone, Heidi Chakos of Crypto Tips reported that $11 billion was lost by investors and clients of both FTX and Alameda Research.
(To be continued)