The Story of Sam Bankman-Fried
Already a well-known name in cryptocurrency, Sam Bankman-Fried made global headlines in November 2022 when his crypto exchange spectacularly imploded.
FTX, the second largest crypto trading platform, and Alameda Research, a DeFi investment business also started by Sam Bankman-Friedman, declared bankruptcy amid reports about the way customer’s funds were being handled.
Last month, the criminal trial of Bankman-Fried, for charges related to the exchange collapse, began in New York, bringing SBF right back into the spotlight.
Now seems like a good time to remember the background of the one-time crypto wunderkind.
Sam Bankman Fried origin story
Born in March 1992, SBF was seen as a digital asset prodigy, launching Alameda Research in 2017, aged just 25, and the FTX exchange two years later.
He was born at Stamford University, where his parents, Joseph Bankman and Barbara Fried, were professors. His own education took place at California’s Crystal Springs Uplands School and Massachusetts Institute of Technology, which he graduated from with a degree in physics and a minor in maths in 2014.
Before graduating, Sam Bankman Fried spent a summer interning at Jane Street Capital, where he traded ETFs. After leaving MIT, he returned to the firm, but three years later, in September 2017, SBF was on the move again, this time to the Centre for Effective Altruism (CEA) in California.
In the same year, he and Tara MacAulay, also of CEA, launched Alameda Research, a quantitative trading firm. It made quite a stir with its arbitrage trading, which took advantage of the higher value of BTC in Japan than in the US, reportedly completing trades worth up to $25 million every day.
On the back of his success, Sam Bankman Fried moved to Hong Kong in 2018.
In mid-2019, the FTX exchange was opened, and it rapidly grew to become second only to Binance as a crypto trading platform.
It all goes wrong
In November 2022, Alameda Research and FTX filed for Chapter 11 bankruptcy.
This came at a time when Sam Bankman Fried was still revered by many in DeFi, and he was, reportedly, the 60th richest person in the world, with a peak personal fortune of $26 billion.
Based in the Bahamas, SBF was seen to use his wealth to support political campaigns in the US.
In December 2022, eight criminal charges were filed at the Southern District of New York Court, including allegations of wire fraud, securities fraud, money laundering, commodities fraud, and campaign finance law violations.
Four further charges follow in early 2023.
SBF was bailed to his parent’s home, but later remanded in custody due to allegations of attempts to tamper with witnesses.
His trial finally got underway last month.
Views on regulation
The collapse of FTX, one of the biggest names in crypto, raised serious questions around the need for regulating the industry, and led many jurisdictions to ramp up regulatory efforts.
During the investigation, allegations around the management of both FTX and Alameda were made, including concerns about a lack of corporate governance, understanding of finances, and observation of the rules.
SBF had spoken publicly about his views on crypto regulation, openly stating he has chosen to relocate FTX to the Bahamas due to what he termed a ‘friendly’ regulatory environment.
During a conversation on Twitter (now X) in the same month FTX crashed, SBF described the appearance that his firms welcomed regulation and promoted the need for regulators in crypto as ‘just PR’ and not sincere.
He claimed rules ‘don’t protect customers’ and make ‘everything worse’. He later attempted to clarify these statements, claiming he was referring to greenwashing, ESG (environment, social, and governance), and CSR (corporate social responsibility) being used instead of effective altruism.
“Complete failure of corporate controls”
Among the most damning statements and allegations made in the wake of the collapse of Alameda Research and FTX were those from John J. Ray III.
Ray, the man who oversaw the five-year bid to recover money for Enron creditors, took over as FTX CEO following the resignation of Sam Bankman Fried on 11 November, 2022. The firm filed for bankruptcy the same day.
Later in the month, Ray, in a sworn declaration to the bankruptcy court, gave his assessment of Alameda and FTX. He said that 'never in my career' had he witnessed 'such a complete failure of corporate controls' or a 'complete absence of trustworthy financial information’.
SBF had been due to testify to the House Financial Services Committee in December 2022. He was expected to claim FTX remained solvent, but he’d been ‘pressured' into declaring bankruptcy. He was also due to allege that those who had taken over running the firm were following the Enron precedent to earn high fees.
Following his arrest, SBF did not appear before Congress.
Author: Brendan Beeken
Moni Talks Founder and Chairman Brendan Beeken is an entrepreneur, commercial strategist, investor, and philanthropist. He writes on a wide range of subjects, including cryptocurrency, decentralised finance, blockchain, business advice, and professional wellbeing, for news and business websites, as well as Latest Moni and his personal site, brendanbeeken.com. Brendan draws from his own research and more than two decades of personal experience in business to offer a unique insight, perspective, and commentary on diverse subjects. He is passionate about making the cryptocurrency space more accessible and encouraging safer and more responsible trading and investing. Brendan's LinkTree is https://linktr.ee/brendanbeeken.