In November 2022, Sam Bankman-Fried, a young entrepreneur once known as the "King of Cryptocurrency," experienced a dramatic turn from peak to trough in just eight days. His company FTX declared bankruptcy, he resigned as president, and may face an investigation by U.S. federal authorities to examine how he handled corporate assets.
The rise: From student dorm to billionaire
Born into an academic family, Bankman-Fried graduated from the Massachusetts Institute of Technology (MIT) with a major in physics and mathematics. During his student years, he was exposed to the concept of "effective altruism" and developed the goal of improving the world by making huge wealth.
Initially, he studied stock trading at Jane Street, a New York securities firm, but soon turned to the Bitcoin market and discovered that there were differences in Bitcoin prices on different exchanges, from which he conducted arbitrage transactions. With this idea, he founded the brokerage firm Alameda Research and quickly made a profit. By early 2018, his team's daily turnover had reached $1 million.
In 2019, he founded FTX, a rapidly rising cryptocurrency exchange that has become not only the industry leader, but also the world's second largest crypto exchange, with a daily trading volume of $10 billion to $15 billion. In early 2022, FTX's market value reached $32 billion, and he officially became a billionaire.
An alternative entrepreneur
Bankman-Fried's lifestyle is equally unique. He often sleeps on a bean bag next to his office to stay on task. He is also an avid video gamer, often playing League of Legends and Storybook Brawl during conference calls, and even bought a game development company for the latter.
Although his behavior is questionable, it has not prevented investors from trusting him. For example, Sequoia Capital once saw Bankman-Fried talking about business plans while playing a game of League of Legends in a meeting with him, and finally decided to invest $210 million. However, Sequoia Capital recognized the investment as a loss after FTX went bankrupt and deleted the blog post that had praised Bankman-Fried.
Collapse: From a $32 billion empire to bankruptcy
FTX's downfall began with an article published by CoinDesk, which revealed that Alameda Research's assets were not independent, but based on FTX's own tokens. This raised questions about FTX's financial soundness. The subsequent (Wall Street Journal) further accused Alameda Research of using FTX customer funds for lending transactions.
This series of accusations has plunged FTX into a crisis of trust. When its main competitor Binance announced the sale of its FTX-related tokens, users flocked to withdraw funds, causing FTX to fall into a liquidity crisis. Although Bankman-Fried tried to seek an acquisition by Binance, Binance eventually gave up and publicly pointed out that FTX had "improperly handled customer funds."
In the end, FTX declared bankruptcy in November 2022, and Bankman-Fried tweeted an apology to the public, saying that he was "shocked" and hoped to find a way to recover.
Aftermath: Crypto Market Shock and Reflection
FTX's bankruptcy triggered a chain reaction in the cryptocurrency market, with Bitcoin prices falling to a two-year low and investors generally panicking. FTX has as many as 1.2 million registered users, from big investors to ordinary users, and many are still trying to recover their frozen deposits.
Bankman-Fried's story is not only a legend of personal rise and fall, but also a microcosm of the high risk and high reward coexistence in the cryptocurrency world. This dazzling and dramatic collapse may be just the tip of the iceberg of industry chaos, and people are still waiting for the answer: who will fall next?
