VOICE OVER: Rebecca Brayton
WRITTEN BY: Nick Spake
Sam Bankman Fried and FTX deserve a deep dive. Welcome to WatchMojo, and today we're exploring the rise and fall of FTX, as well as its now infamous founder. Our video examining the untold story of FTX founder Sam Bankman Fried will look at SBF's origins, the start of FTX, its collapse, and more!
The Untold Story of FTX Founder Sam Bankman-Fried
Welcome to WatchMojo, and today we’re exploring the rise and fall of FTX, as well as its now infamous founder.
When you first heard the initials SBF, you might’ve assumed that it was a stock. Actually, it stands for Sam Bankman-Fried, a young crypto entrepreneur who became synonymous with three other letters: FTX (or Futures Exchange). Just as the stock market blurs the line between investing and gambling, many placed their faith and money in SBF, confident that he was a safe bet. People wanted to believe that Bankman-Fried would pave a brighter future not just for crypto users, but for the whole world. Once seen as the altruistic version of Mark Zuckerberg, Bankman-Fried is now being compared to Bernie Madoff, Elizabeth Holmes, and other fallen billionaires, leading people to wonder if the “F” in FTX should’ve stood for “Fraud.”
The son of Stanford Law School professors Joseph Bankman and Barbara Fried, Sam Bankman-Fried was born on the university’s campus in March 1992. Despite ties to Stanford and Columbia University where his aunt is dean, Bankman-Fried attended MIT. He also considered Cal Tech, but MIT won a coin flip. After graduating with a major in physics and a minor in math, Bankman-Fried continued to work for the property trading firm Jane Street Capital before moving to the Centre for Effective Altruism where he became director of development. His time at CEA only lasted two months, as Bankman-Fried joined forces with the company’s CEO, Tara Mac Aulay, to launch Alameda Research. With Bankman-Fried owning roughly 90%, this crypto trading firm would gain a sister company in FTX just two years later.
Co-founded by Bankman-Fried and former Google Flights employee Gary Wang, FTX showed rapid growth from its genesis in March 2019 to its peak in July 2021 when the company was valued at $18 billion following a $900 million funding round. In addition to major investors like Softbank and Tiger Global Management, FTX received endorsements from names like Shaquille O’Neal and Tom Brady, the latter of whom developed a friendship with Bankman-Fried. Arguably the most widely seen endorsement came from Larry David in a 2022 Super Bowl ad. The commercial depicts David as someone who historically makes poor choices, passing on FTX being the latest in a long line of missed opportunities. Ironically, Larry had the right idea here, but we’re getting ahead of ourselves.
By 2022, Bankman-Fried ranked 41st on Forbes’ 400 Richest Americans and 60th on The World’s Billionaires with a net worth estimated at $26 billion. You wouldn’t guess this based on Bankman-Fried’s untamed hair, casual clothing, and the bean bag chairs where he took naps, painting him as a humble everyman. This isn’t to say that Bankman-Fried and FTX weren’t spending extravagant amounts of money left and right. In 2021, FTX spent $135 million on the naming rights to the American Airlines Arena in Miami, Florida, changing it to the FTX Arena. In 2022, it was reported that Bankman-Fried and fellow FTX executive Ryan Salame spent $256.3 million on 35 properties in the Bahamas. This is also where FTX set up its $60 million headquarters.
Nevertheless, Bankman-Fried prided himself on being an effective altruist, saying in January 2022, “I wanted to get rich, not because I like money but because I wanted to give that money to charity.” The following June, he signed the Giving Pledge with aspirations to eventually give away most of his $26 billion fortune. In addition to charitable organizations like Giving What We Can, Bankman-Fried became a prominent political donor. Although he gave to Republicans and Democrats, Bankman-Fried most notably donated $5.2 million to Joe Biden’s 2020 presidential campaign, making him the second-largest contributor after Michael Bloomberg. Bankman-Fried sought to spend at least $1 billion on the 2024 presidential election with rumors circulating that he might pay Donald Trump $5 billion not to run.
Summer of 2022 was rough on the crypto world with Terra-Luna, Celsius Network, and Voyager all collapsing. Despite some skepticism, FTX appeared too big to fail, only trailing behind Binance in the crypto exchange market. FTX was even in talks to purchase BlockFi for up to $240 million. Just as BlockFi faced bankruptcy, FTX would soon find itself in a similar position. November 2022 saw a downhill spiral, starting with a CoinDesk article that claimed Alameda Research possessed a substantial quantity of FTX’s native token, FTT. Although Bankman-Fried co-founded both companies, FTX and Alameda Research operated separately. Yet, this didn’t stop Alameda from borrowing billions in FTX customer funds and trading them. Alameda was seemingly FTX’s biggest customer, allowing it to withdraw “unlimited funds.”
Days after CoinDesk shined a spotlight on this “unusually close” relationship, Binance CEO Changpeng Zhao announced that his company would sell its FTT holdings. News also broke that Binance was in talks to acquire FTX. The value of FTT subsequently plummeted from $22 to less than $5, erasing nearly $2 billion. Binance ultimately decided not to move forward with the deal, pointing to FTX’s “mishandled customer funds.” By the end of the month, FTX, Alameda, and more than 130 affiliated entities would file for Chapter 11 bankruptcy. Many attempted to withdraw from FTX during this time, but the firm was unable to meet demands, leading to a shortfall of $8 billion. In under a week, Bankman-Fried’s net worth went from $16 billion to virtually nonexistent.
As all hell broke loose, Bankman-Fried flocked to the Bahamas, staying in a $30 million penthouse he shared with others. By December 2022, the authorities showed up at Bankman-Fried’s apartment, arresting him. He was to be extradited to the U.S. where a trial awaited. Bankman-Fried was far from the only one facing legal troubles. A lawsuit has been taken out against Tom Brady, Larry David, Shaquille O’Neal, and other big names who promoted FTX. On December 21, 2022, Gary Wang pleaded guilty to wire fraud and three counts of conspiracy. Caroline Ellison, Alameda Research’s former CEO and Bankman-Fried’s former girlfriend, also pled guilty. Ellison previously announced that she, Bankman-Fried, and Wang knew what FTX was doing with customer funds.
Meanwhile, Bankman-Fried entered a “not guilty” plea on January 3, 2023. Released on a $250 personal recognizance bond, Bankman-Fried was permitted to stay with his parents under house arrest in California leading up to the trial. Despite the advice of his attorneys, Bankman-Fried continued to use social media and speak to the press. His bail was revoked in August 2023 amid allegations of witness tampering. The prosecution argued that Bankman-Friend attempted to “discredit” Ellison as a witness by leaking her personal diary to the New York Times. Bankman-Friend spent the next two months in Brooklyn’s Metropolitan Detention Center with the trial commencing on October 3, 2023. Proceedings are expected to last for roughly six weeks with Ellison and Wang among the witnesses.
The downfall of FTX was felt throughout the crypto industry with Bitcoin’s price hitting a two-year low. FTX is a cautionary tale - not just for the gamble that is crypto, but for the gamble of placing unchecked power in one individual. FTX had no CFO, virtually no HR department, and when the company finally instituted a board of directors in January 2022, the VC firms that invested weren’t given seats. Bankman-Fried held most of the power as FTX’s CEO, a position now filled by John J. Ray III. Ray specializes in recovering lost corporate funds, but he called FTX’s situation “unprecedented.” And this is coming from a guy who oversaw the Enron fallout. Many FTX customers likely won’t receive satisfaction beyond seeing Bankman-Fried behind bars.
While Bankman-Fried isn’t expected to receive the 115-year maximum sentence, it’s inclined to be a significant sentence if found guilty. Whether Bankman-Fried’s intentions were noble or not, he quickly went from being a symbol of altruism to the poster child for reversed fortunes. In that sense, FTX’s Super Bowl ad foreshadowed Bankman-Fried’s downfall with the “Curb Your Enthusiasm” theme now providing the soundtrack to his life.
What are your thoughts on SBF, FTX, and the future of crypto? Let us know in the comments.