Sam Bankman-Fried, known as "Musk in the currency circle", is only 31 years old. He founded the digital asset derivatives trading platform FTX and built it into one of the largest trading platforms in the field of virtual expansion, with more than 1 million users worldwide. users. This Manhattan Ivy League graduate has become a "legendary rich man." Not only that, he also faces up to 115 years in prison for "seven deadly crimes" including wire fraud, conspiracy to commit fraud, and conspiracy to commit money laundering, making him the "biggest criminal in U.S. history." One of the financial fraud cases."
As of early 2022, FTX’s valuation has reached as high as US$32 billion, equivalent to approximately 230 billion yuan. This achievement has led to Bankman Fried being selected into Time magazine's list of the "Top 100 Most Influential People in the World" in 2022.
However, fate is unpredictable. At the end of 2022, FTX fell into a liquidity crisis, followed by an avalanche of bankruptcy, causing Bankman Fried's book wealth to return to zero. He went from being a popular young elite in the currency circle to falling into the position of a financial fraudster. This plot can be described as a clear promotion and dismissal, which is in sharp contrast to his once glorious career.
In 1992, Sam Bankman-Fried was born on the campus of Stanford University. His parents were Professor Barbara Helen Fried and Joseph Bankman of Stanford Law School. Alan Joseph Bankman). As early as his student days, he showed outstanding mathematical talent. In high school, he participated in the Canada/USA Math Summer Camp, a program designed for high school students with mathematical geniuses.
Bankman-Fried then attended MIT, where he earned a bachelor's degree in physics and a minor in mathematics. After graduation, he started working as a trader at trading firm Jane Street Capital.
While working at Jane Street Capital, Bankman Fried began to observe price disparities in the cryptocurrency market. This means that the price of the same cryptocurrency can be different on different exchanges. He took advantage of this market phenomenon and used an arbitrage strategy of buying low and selling high on an exchange, from which he made considerable profits. This strategy usually requires keen market insights and efficient execution capabilities.
Perhaps it was through this trading experience that Bankman Fried recognized the potential business opportunities in the cryptocurrency market. He founded a trading company called Alameda Research in 2017 with the aim of using algorithms and automated trading systems for cryptocurrency trading. In less than a year, he built Alameda Research into an industry-leading trading company.
In 2019, Bankman Fried founded FTX, a digital asset derivatives trading platform designed to provide cryptocurrency traders with more options and tools.
Bankman Fried realized that FTX needed to adopt an aggressive strategy to stand out in the highly competitive cryptocurrency trading market. He employed a variety of strategies, one of which allowed users to trade with high leverage, which allowed them to make riskier bets in the hope of earning higher returns. In addition, FTX lowers the fees extracted by exchanges, attracting more traders.
However, Bankman Fried is looking beyond traditional cryptocurrency traders and has his sights set on new users who have yet to venture into the cryptocurrency market. He recognized that potential cryptocurrency users tend to be young people who seek excitement, have some spending power and are interested in gambling. This user profile has a high degree of overlap with avid fans of sports events, so FTX decided to attract this target audience through sponsorship of sports events.
FTX invested heavily to obtain the naming rights of the Miami Heat basketball stadium and renamed the main venue FTX Arena. In addition, FTX has purchased millions of dollars in advertising time to promote its brand to Super Bowl events across the United States, introducing FTX to a wide audience through a two-and-a-half minute advertising video.
In June 2021, the famous e-sports club TSM announced that it had reached a 10-year title sponsorship agreement worth US$2.1 billion with FTX, and subsequently changed the team name to TSM FTX. This move greatly enhanced FTX's popularity, attracted a large number of users and capital inflows, and made FTX the third largest cryptocurrency exchange in the world.
With the rise of FTX, Bankman Fried’s personal wealth has also risen rapidly. By the time he was 30, his total assets had reached $17 billion. In July 2021, FTX completed a US$900 million round of financing at a valuation of US$18 billion, attracting well-known institutional investors, including SoftBank and Sequoia.
In October of the same year, Bankman Fried appeared on the cover of Forbes magazine and was selected as one of the richest people under the age of 30 in the world. In January 2022, FTX raised US$4 billion in Series C financing, with a valuation reaching US$32 billion. In May of that year, Bankman Fried was selected into the 2022 "Top 100 Most Influential People in the World" list by Time magazine, becoming the only person in the encryption industry to be selected for this list.
Unlike the suits and leather elites who are common on Wall Street, Bankman Fried prefers to show off in sweatpants, sweatshirts, T-shirts and sneakers. He is not interested in luxury cars and will not buy expensive sports cars. This simple and eclectic lifestyle is in line with the "anti-authority" and "anti-trend" concepts in the cryptocurrency world, and complements the style of the currency circle.
However, just as his reputation quickly emerged in the currency circle and won many accolades, there was also an undercurrent. Although he is known as "Musk in the currency circle", "Big Brother in the currency circle", and "the richest genius", he also faces unprecedented challenges and pressure in this industry full of risks and competition.
Perhaps, the seeds for the future risks of FTX, the star cryptocurrency exchange, were initially planted. Unlike traditional financial institutions, FTX, which has a daily trading volume of up to $14 billion, does not need to disclose too much information to the public and regulators.
This means that for users, FTX’s financial situation is a bit like Schrödinger’s cat. If you don’t take the initiative to open the lid of the box, you have no way of knowing what’s inside the box.
On November 2, 2022, CoinDesk reported that there were a large number of uncirculated FTT tokens in Alameda Research’s asset load, causing market concern. The FTT token is a cryptocurrency issued by the FTX exchange and is critical to the exchange’s funding. Before FTX went bankrupt, the market value of FTT tokens once ranked among the top 25 cryptocurrencies by market value.
It should be pointed out that although Alameda Research has nothing to do with Bankman Fried as early as 2021, as a company founded by Bankman Fried, the connection between Alameda Research and FTX is still very close, which triggered Certain concerns.
Yes, there are indeed some signs of "left hand over right hand". Bankman Fried appears to be operating back and forth across different sectors and companies by overestimating the value of tokens and expanding the size of the asset sheet, and then using these assets as collateral to obtain large loans. These actions have resulted in the market overvaluing FTT tokens and Alameda Research assets.
Once this information was exposed, FTX's customers and investors demanded withdrawal of capital, triggering a run. According to reports, users withdrew a total of $5 billion in just one day! According to reports, FTX has a total of $16 billion in customer assets, half of which is lent to Alameda Research.
Faced with this crisis, Bankman Fried tried to find someone to acquire or invest in FTX, but all ended in failure. Finally, FTX, Alameda Research and related companies declared bankruptcy on November 11, and Bankman Fried resigned as CEO of FTX and other companies.
Screenshot from New York Post
Yes, the rise of FTX and Bankman Fried’s wealth accumulation are astonishing. In just three years, FTX has grown from its inception to a leader in the industry, and Bankman Fried has also made it to the cover of Forbes in just two years, becoming one of the richest people in the world.
After the FTX scandal, companies and celebrities who had promotional cooperation with FTX have distanced themselves from their relationship with FTX. The Heat's home arena and TSM have successively taken away the title of FTX.
In November 2022, Bankman Fried was sued collectively by investors. Investors claim that Bankman Fried violated Florida law and caused consumers to suffer losses of more than $11 billion (approximately RMB 80.3 billion)!
The seven charges faced by Freed are: remote fraud against FTX customers; remote fraud against Alameda lenders of FTX affiliated trading company Alameda Research; remote fraud conspiracy against FTX customers; Alameda counts of remote fraud conspiracy against Research’s lenders; securities fraud conspiracy against FTX investors; commodities fraud and conspiracy against FTX customers; and money laundering conspiracy. It can be called the "seven deadly sins" in the currency circle.
The lawsuit stated that FTX "based on false statements and deceptive behavior" caused consumers to suffer losses, and that founder Fried and a number of celebrities participated in, assisted and promoted the activities of the platform.
FTX Group disclosed liabilities of $10 billion to $50 billion in its bankruptcy filing, according to bankruptcy court documents. Federal prosecutors called it "one of the largest financial frauds in U.S. history."
On November 2, 2023, the jury made a verdict on seven charges involving FTX, including wire fraud, conspiracy to commit fraud, and conspiracy to commit money laundering, and found Bankman Fried and his company guilty. This case was described as "one of the largest financial fraud cases in American history." The trial began in early October and lasted for one month, with the sentencing date set for March 28, 2024.
If convicted at sentencing and given the maximum penalty, Bankman-Freed could face up to 115 years in prison. The trial process of this case has attracted widespread attention and raised important questions about the cryptocurrency market and regulation.
Regarding Bankman-Fried's parents, although he claimed they were not involved in "any relevant part" of FTX's operations, court documents and related sources believe the couple may have knowledge of their son's financial activities, or to some extent. Related to it. This will continue to be considered at trial and could have an impact on the final verdict in the case.
Mr. and Mrs. Freed attended the trial. Picture from CNN
Outside the courts, FTX’s collapse triggered huge volatility in the cryptocurrency market. FTX’s ties to Alameda Research and other parts of the cryptocurrency market are very strong, so FTX’s problems rippled throughout the industry. In November 2022, the price of Bitcoin plummeted, falling more than 14% at one point and falling below the $16,000 mark, reaching its lowest point of $15,668.
At almost the same time as Bitcoin, the price of Ethereum plummeted by approximately 19% in just 5 days, from over $1,600 to $1,091. The stunning price drop triggered widespread market turmoil and investor panic.
Compared with some unknown small exchanges, FTX, as the third largest exchange in the world at that time, was already regarded as a relatively reliable platform. However, when problems arise, the impact on the currency circle may last for a long time and be difficult to recover from.
Before being detained, Bankman Fried posted an apology on social media, saying: "I'm so sorry, that's the last thing I should have said..."
However, all this is irreversible. The volatile cryptocurrency market has provided people with the opportunity to re-examine the value of digital assets, making people begin to wonder whether the rise and fall of each digital asset is really related to the supply and demand relationship in the market.
Bankman Fried's fall from billionaire to prisoner status in just a few years is deeply regrettable.
