A drone footage lets you admire it penthouse overlooking turquoise Bahamian waters. A light breeze licks some palm trees and tropical ferns that inspire nothing but an earthly paradise. Last January, Sam Bankman-Fried opened his doors to an influencer for a short video. We discover this fat face, this thick curly hair and this neglected look characteristic of the little geniuses of Tech. “I’ve always wanted to get rich,” he confesses with strange calm. “SBF”, 29 years old, then weighs about 17 billion dollars and its cryptocurrency exchange platform, FTX, not far from double. Which is not an end in itself. “I have no love for money, I wish I could give everything to charity.” Sam talks about “effective altruism”, a life concept dreamed up by his friend and philosopher William MacAskill, which can be summarized as follows: the more money you make, the more you can give, the more you have. The world. CQFD.
Sam Bankman Fried recites in the style of the Miss pageant the causes that are dear to him: ecology of course and health. “We must be ready for the next pandemic”. At this moment, he has “only” shared 50 million dollars of his immense fortune. But Sam still has it under his feet. His skin shows no trace of tan. He sleeps little, spends his time in front of curves and charts, or playing the game League of Legends ; sometimes both at the same time. The Bahamas is only the country of registration of his company FTX. This son of two very good law professors benefits from the tax flexibility of the archipelago. Sam could thus become the first trillionaire on the planet, comments the influencer in an advertising tone. The ultimate evolution of the former software salesman turned philanthropist, Bill Gates. A white knight.
The harder the fall
Monday, November 14, on Twitter. SBF writes one by one the letters that form the expression: what happened (What just happened?). His empire sank because of his fault and he finds himself ruined. Eight billion dollars are missing from the coffers of the exchange platform. Sam is still in the Bahamas, but under the watch of the authorities. A real introductory scene to a continuation of the saga very bad trip. Many small investors are also hungry. Even stars in the world of sports like the American football player Tom Brady who had entrusted 600 million dollars to FTX. Platform where you can buy bitcoin, ethereum and hundreds more corners, was creating billions in digital assets with five million users. Basically to buy and later resell the same tokens after they have gained value. “Trade”. Because it must be remembered: cryptocurrencies are still very little used to pay anything. Everyone is there to make money, Sam first.
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In 2017, two years before FTX was founded, Sam Bankman-Fried founded Alameda Research for this very purpose. The company specializes in “quantity trading”. It invests heavily in the financial markets. It was her baby that allowed her to make a fortune with a clever maneuver. SBF finds that bitcoin is sold more in Southeast Asia than in the United States. Therefore he buys the most famous cryptocurrency in the secondary market to sell it in the primary market. Bankman-Fried collects the first millions in a system glitch and launches FTX. He credits the management of Alameda Caroline Ellison, known in the Jane Street trading company, their first relevant professional experiences to leave the prestigious. Massachusetts Institute of Technology (MIT), where they were trained. The American media gives them a romantic relationship.
The FTX is the second stage of the Bankman-Fried rocket. The company is enjoying extremely fast growth thanks to Covid-19, which broke out just a few months after its creation in November 2019. The health crisis has increased our use of digital technology, a precious escape in times of lockdown. At the same time, it has stimulated public interest in cryptoassets, seen as the future currencies of the Internet. That’s good, trading platforms like FTX, Binance or Coinbase make it possible to buy these digital goods and store them, without any special computer skills. These “facilitators” benefit at this time from the considerable liquidity in the market, which makes their subsidization possible. In addition to helping neophytes, these platforms are also developing new products for returning trading professionals towards “decentralized finance”, DeFi. The result: a wave of traders like Sam is sweeping through crypto. SBF is a great example of success for them.
This alignment of planets apparently makes FTX too big to fail (too big to fail). Last spring, she dared to rescue friends in dire straits, following the lead of crypto-asset loan and savings specialist BlockFi. In August, the business magazine wealth realizes One on Sam: “Is he the next Warren Buffet?”, this American multibillionaire, the Pope of investments for more than 50 years. The timing is ideal. Crypto survived a spring crash, the market seems to be improving. bad seeds like Do Kwonthis arrogant South Korean entrepreneur who managed to stamp a “stable” cryptocurrency pegged to the dollar are out of service. swindlers hunted. The American Congress invites the SBF twice, this winter, to evoke the regulation of the sector. He promotes more transparency in the suit and tie, reinforcing his position as a man of faith, with politicians overwhelmed by the jargon and mysteries of this new world. In the sector, however, it makes people shudder. For many pro-cryptos, blockchain aims to disrupt the current monetary and financial system. To disrespect.
On November 2, an article from the specialized website CoinDesk warns: “The ties between FTX and Alameda Research are extremely close.” The media reveals that its funds, in case of losses, are mainly guaranteed by the cryptocurrency FTT, which also belongs to FTX. A very dangerous practice. Do Kwon and its stablecoin fell due to a similar reason. Another stablecoin, Tether, the most widely used in the world, was sanctioned after an audit of its reserves, which were deemed insufficient to cover potential mass withdrawals. Many immediately understand the dangerousness of this mechanism. In particular Changpeng Zhao, alias CZ, the head of Binance, no less than the world’s largest trading platform before FTX. The latter announced on November 6 to sell part of its FTTs for security.
A bunch of followers imitate him (just one click). The token’s value plummets, sinking Alameda, then FTX, in a predictable snowball effect. Analyst at IG France Vincent Boy dares the comparison, with L’Express: “It’s a bit like in France BNP Paribas had hired a bank execution, a flight of capital, in Société Générale.” After falling to zero, SBF apologizes. “Sorry, I broke.” In the mess, pirates get hold of 600 million euros. November 11 bankruptcy is declared. From a bad manager, SBF becomes suspected fraud within hours. New York Times reveals that Alameda, which had experienced significant losses before the summer, was bailed out by FTX client funds. The writing of wealth still to be congratulated for posing this question mark.
Sam Bankman-Fried’s alleged scam marks today’s return to square one for the crypto world. His ratings are back to pre-Covid levels. The swings caused by the FTX drop could however be felt for weeks or even months. SBF has evaporated billions, broken the trust of users, investors. “I have never felt it”, judges the French entrepreneur Réda Berrehili, who compares him to Jordan Belfort, “The wolf of Wall Street”. He wishes he hadn’t listed his Ki token, on FTX, as the now dark knight in the middle had personally asked him to do in Telegram messages.
One question remains: how have venture capitalists – who have never worn their names so well – been able to invest massively in FTX and its vision for Web3? Sequoia Capital, or even SoftBank, well anchored in the traditional economy, have richly furnished Sam Bankman-Fried’s portfolio. Major stadiums in the United States have accepted FTX sponsorship money. The Democratic and Republican parties collected money donated by SBF for their campaigns. No one ever found fault with him. Because the crypto money kept flowing. And because there is no strict control of the sector, it is likely to prevent Sam Bankman-Fried from doing as they see fit. Much less under the Bahamian sun.
The Chronicle of Christophe Donner