FTX CEO Sam Bankman-Fried spent the previous year on a victory tour. The “Crypto Kingpin” held court at Bloomberg’s Crypto Summit this summer and was crowned as a major donor savior to Democrats in the midterm elections. His company also praised his League of Legends game during high-level meetings with investors pouring hundreds of millions of dollars into his growing crypto exchange empire. Currently, in the span of only a week, it’s all gone.
It began on Nov. 2 when Coindesk announced that Bankman-Fried’s trading firm, Almeda Research, held $14.6 b in FTT coin, a token created by his crypto exchange, FTX. This was considered too bad because of many things, involving the fact that it’s never a good sign when $14.6 b worth of one token is held by a company. At its peak, each token was worth more than $70. Presently they are trading for less than $4, a loss of about 95%, depending on when the tokens were purchased.
Binance, the world’s largest crypto exchange and FTX’s major competitor, tweeted about how this didn’t look good, that then led to people trying to withdraw their money out of FTX getting a “ run on the bank”. The value of the token fell. Binance offered to purchase FTX. Thereafter, it looked at the FTX’s books and said no thanks. Now FTX, which was valued at $32 billion just a few months ago, is dodging regulatory investigations, possible lawsuits, and apparently bankruptcy.
This was one of the big selling points for GameStop's NFT marketplace, that they had cover from the cracker jack team at FTX https://t.co/1aFo4LUywo
— Michael ($8 for whisky) Pachter (@michaelpachter) November 9, 2022
At the center of all this, however, is Bankman-Fried. There have been crypto scams of all kinds, but the total point of FTX was that it was thought to be legit, in part because it was run by a really intelligent guy. None of this crypto shit makes any sense to you? Don’t worry, this guy has figured it out, and will make you and him billions of dollars with his really great ideas about finance and crypto. And he will do it ethically. “A 30-year-old crypto billionaire wants to give his fortune away,” reads one Bloomberg headline. “Sam Benkman-Fried drives a Corolla, sleeps on a bean bag, and has a Robin Hood-like philosophy”.
And many people were convinced. Even if you don’t think you’ve ever heard of FTX or Bankman-Fried, you may see the nearly $25 million commercials for both featuring Larry David at the current year’s Super Bowl. The man invested $40 M into the 2022 midterms races to push the importance of pandemic preparedness. Stonk memelords were pretty convinced that GameStop’s NFT collaboration with FTX could help the ailing video game retailer to the moon.
6) (Guess that my age didn't quite hit the bar.)
— SBF (@SBF_FTX) February 4, 2021
Some of this manifests in straightforward ways. Each Sunday, I go to https://t.co/2lpv6T5YmC and pull up my 3 favorite games for each time slot, watching them in the background while I work.https://t.co/XOwOLnWtEH
In deed, Bankman-Fried was smart enough to pitch some of the world’s biggest investors on why they should give him their money in the middle of a League of Legends team fight. According to Bankman-Fried’s September profile, he was doing just that as trying to get more funding for FTX in a Zoom call with venture capital firm Sequoia by talking about how the cryptocurrency exchange would become a “super app.” Below is an excerpt:
That is when SBF told Sequoia about the so-called super program: “I want FTX to be a place where you can do whatever you want with your next dollar. You can purchase bitcoin. You can send money in any currency to any friend anywhere in the world. Furthermore, you can purchase a banana. You can do anything you like with your money from inside FTX”.
Suddenly, the chat window lights up on Sequoia’s side of the Zoom, making their partners angry.
“I love this founder,” one partner typed.
After that meeting, Sequoia invested more than $200 million in FTX. But really, they were banking on Bankman-Fried, The Magic: The Gathering, who was going to hand them one program to rule them all, after it ran afoul of some randos (FTX is also the league’s $210 million sponsor It’s professional. TSM team). Yesterday, Sequoia zeroed out the entire investment as worthless.
“I don’t know how I know, I just do,” Adam Fisher, the author of the above excerpt, wrote in his brilliant September profile. “[Sam Benkman-Fried] is a winner.”
“It came out 6 weeks ago,” replied one commenter online, quoting that episode. “Aged well, hasn’t it?”
“It’s pretty scary in retrospect,” Fisher replied. I’m not resigning from my day job to become a technology investor, I will tell you that.”
But Fisher is just a freelancer. Who paid for the profile? Why, Sequoia definitely. You can read “Sam Bankman-Fried Has a Savior Complex—And Maybe You Should Too” on its website, but with a new editor’s note.
“We are taking a risk,” the updated letter from the partners reads in part. “At the time of our investment in FTX, we undertook a due diligence process.”
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