From Wall Street to Crypto Billionaire: The Rise, Controversies and Net Worth of Sam Bankman-Fried, the Mastermind Behind FTX

Image credit: Jeenah Moon/Bloomberg via Getty Images

According to the accusations against Sam Bankman-Fried, he committed "one of the largest financial frauds in American history."

• Sam Bankman-Fried is currently free on bond while he awaits trial, but his short-term liberty may be in danger.
• According to CNN, on February 16, during a bail hearing in New York, prosecutors requested that SBF's access to technology be limited since they had suspected him of using a VPN (virtual private network).
• They made the motion after informing the judge that Bankman-Fried was suspected of getting in touch with a potential government witness—a former FTX employee. The judge said that if SBF disobeyed the bail conditions, his bail might "conceivably" be revoked. But, the defense claims that SBF's freedom release is necessary for them to prepare their case, so they have hired a security expert to counsel them.
• The court is expected to reconvene on Tuesday with a proposal from the defense.

The cryptocurrency exchange FTX was founded in 2019 by Sam Bankman-Fried, who then witnessed it all collapse within 72 hours.

FTX attracted significant investors like SoftBank and BlackRock and touted celebrity endorsements from people like Shaquille "Shaq" O'Neal and Tom Brady. The firm' low-risk, high-reward strategy yet seemed almost too wonderful to be true. It was, too.

According to Reuters, between $1 billion and $2 billion in client money has disappeared since the FTX crash.

Since his arrest and subsequent charges of fraud, SBF has been accused of orchestrating "one of the greatest financial frauds in American history," according to the prosecution. He might spend as much as 115 years behind bars.

This is everything you need to know about Bankman-Fried during the ongoing cryptocurrency issue.

Who Is Sam Bankman-Fried?

Sam Bankman-Fried was a rising crypto whiz and academic standout before to becoming involved in the FTX incident.

Bankman-Fried, also known as "SBF," was raised in California by his parents, Joseph Bankman and Barbara Fried, both of whom taught law at Stanford University, according to Reuters. He was a math prodigy who later graduated from MIT in 2014 after achieving academic success.

How Did SBF Make His Money?

Bankman-Fried engaged in currency, futures, and exchange-traded fund trading while employed by Jane Street Capital in New York City after receiving his degree. At the age of 25, SBF left the organization after three years to launch his own cryptocurrency trading business, Alameda Research.

Alameda, which had its headquarters in Hong Kong, made money by capitalizing on regional variations in the cost of bitcoin. According to The New York Times, the corporation would buy Bitcoin in Asia and sell it abroad in order to profit from the exchange rate differential.

Investors were alarmed by Alameda's lack of regulatory monitoring despite the fact that it ran very similarly to a regular Wall Street business, according to the site. SBF introduced a cryptocurrency exchange, FTX, in 2019 to aid in generating income for Alameda's trading. FTX greatly profited from the rising demand for bitcoin.

According to CNBC, the company was worth $32 billion in January 2022.

In December 2021, SBF discussed crypto rules and spoke before Congress, outlining his alleged readiness to introduce controls to the industry—something that crypto fans normally loathe. SBF stated in an interview with The New York Times that helping to regulate the business is still essential to him despite facing legal issues as a result of the FTX crash.

What Is Sam Bankman-Fried's Net Worth?

According to Bloomberg Billionaires Index, Sam Bankman-Fried had an estimated net worth of $15.6 billion just days before his crypto enterprise crumbled. He lost all of his money and now had $1 billion. One of the largest one-day falls the tracker has ever observed was a 94% reduction in his fortune.

SBF's estimated net worth at his height was $26.5 billion, with the majority of his assets invested in his businesses.

SBF promised to donate 99% of his wealth to charities earlier this year, and according to Vox, his FTX Foundation has given over $190 million to a number of causes, including animal welfare and world poverty. Also, SBF described his charity goals in a post to the Giving Pledge website that has since been taken down.

What Is FTX and What Went Wrong?

Alameda Research and the cryptocurrency exchange platform FTX worked closely together.

In addition to charging users to use the site, FTX also produced the FTT token, which, according to The New York Times, was primarily purchased and traded on the exchange by Alameda. It was permitted to set the token's price at a significant discount since it served as the primary market maker, luring investors to the platform with guarantees of a high rate of return.

Major investors like Softbank and Blackrock, as well as a number of well-known entrepreneurs like Gwyneth Paltrow and baseball player David Ortiz, were drawn to the business strategy.

Nonetheless, FTX's strong relationships with Alameda were kept a secret, including SBF's rumored romance with Caroline Ellison, Sam Trabucco's co-CEO of Alameda.

Ellison claimed in an SEC filing that she and others knew Alameda had been utilizing FTX customers' money.

The complaint states that Ellison "confirmed that she, Bankman-Fried, Wang, and Singh were aware that FTX client monies had been spent by Alameda during a meeting with Alameda workers on or about November 9, 2022."

According to AP News, Ellison and FTX co-founder Gary Wang eventually entered pleas of guilty to a number of counts, including wire fraud, securities fraud, and commodities fraud.

FTX and Alameda collectively invested billions in 246 cryptocurrency startups, but despite SBF's desire for more cryptocurrency, investors started to pull away due to volatile cryptocurrency pricing and withdrew money from their accounts.

Alameda started using client monies deposited in FTX to pay back its investors as it struggled to repay its lenders. Alameda allegedly received a $10 billion loan from FTX using client money.

Later, in a last-ditch effort to preserve Alameda, Binance suggested a plan to purchase the business; however, it collapsed after reviewing FTX's records, according to The New York Times. Traders withdrew $6 billion from the platform in under 72 hours after Binance CEO Changpeng Zhao declared he would sell his FTT tokens owing to worries about the company's financial health.

An $8 billion gap in FTX and Alameda's accounts was made public by the bank run.

On November 11, 2022, FTX filed for bankruptcy after having trouble obtaining additional funding for the company. The same day, SBF announced that John J. Ray III, a lawyer, would succeed him as CEO.

What Did Sam Bankman-Fried Do and Why Was He Arrested?

Sam Bankman-Fried is charged with cheating FTX clients by using their money to pay bills and expenditures for the company's sibling organization Alameda Research. Prosecutors claim that in addition to trying to conceal his revenues through wire fraud, SBF also sent investors inaccurate and misleading information, according to The New York Times.

After the United States filed criminal charges against him on December 12, indicating they were "expected to request his extradition," SBF was detained in the Bahamas at his apartment complex, the Bahamas government stated in a statement to the outlet. He is accused of money laundering, securities fraud, wire fraud, securities fraud conspiracy, and conspiracy to commit wire fraud.

Additionally, the Securities and Exchange Commission has authorized charges "relating to Mr. Bankman-Fried's violations of our securities laws."

What Is Sam Bankman-Fried Saying in the Wake of the FTX Collapse?

After FTX imploded, Sam Bankman-Fried has been vocal about what transpired.

Just one day before the company filed bankruptcy, SBF took to Twitter to issue a public apology.

1) I'm sorry. That's the biggest thing.

I fucked up, and should have done better.

— SBF (@SBF_FTX) November 10, 2022

Additionally, he suggested that poor internal organization contributed to their inability to return funds to customers.

Moreover, SBF asserted at the DealBook Conference on November 30 that he "did not ever aim to perpetrate fraud," adding that he "screwed up" and neglected to protect his clients. Following the repercussions from FTX, he asserts that he has always been truthful, saying, "I don't know of times when I lied."

He continued by saying in an interview with The New York Times, "It might be worse." He explained that he was unaware of the substantial risk and amount of borrowing that was taking on between FTX and Alameda. SBF also held himself accountable for not anticipating issues.

"Had I been a bit more concentrated on what I was doing, I would have been able to be more thorough," he said. "That would have allowed me to catch what was going on on the risk side."

Prior to his arrest, SBF told the NYT he was "working constructively with regulators, bankruptcy officials, and the company to try to do what's best for consumers."

What Is Next for Sam Bankman-Fried?

Bankman-Fried was detained and taken to Fox Hill prison in Nassau, Bahamas after being denied bail. In late December 2022, he was transported from the Bahamas to New York after consenting to be extradited to the United States.

SBF waived extradition at his first court appearance in the United States, and the judge approved his release on a $250 million bond. He can also remain under house arrest while awaiting trial at his parents' property in California.

On January 3, 2023, he pled not guilty to eight criminal accusations, including many counts of fraud and money laundering.

SBF is dealing with both criminal allegations as well as a class action complaint that alleges celebrities who promoted FTX, such Kevin O'Leary and Gisele Bundchen, used misleading tactics to "induce trust and to urge people to invest in what was ultimately a Ponzi scheme."

According to Reuters, SBF could be able to come to an agreement that covers both his civil and criminal charges. Prosecutors will also demand compensation for people who suffered financial losses from the collapse.

Bankman-Fried was scheduled to give a testimony about the FTX collapse to the House Financial Services Committee prior to his arrest.

Rep. Maxine Waters, the committee's leader, said in a statement that "the American public deserves to hear directly from Mr. Bankman-Fried about the activities that have injured over one million individuals." "The timing of this arrest denies the public this opportunity to get these answers on oath before Congress," the public said.

SBF was absent from the hearing, but John Ray, the new CEO of FTX, took his place and spoke. The collapse and financial repercussions were attributed to the "absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company entrusted with other people's money or assets," according to him, who called the relationship between Alameda and FTX "old-fashioned embezzlement."

He stated that he is investigating the matter and determining how to pay back creditors and customers during his four-hour speech. That, however, has been difficult due to FTX's disorganization.

"Even with most failed companies, we have a fair roadmap of what happened," Ray said, adding, "We're dealing with a literal paperless bankruptcy."

When asked what role SBF would play in the company going forward, Ray responded: "Zero."

The Wall Street Journal said that FTX recently claimed to have found over $5 billion in cash and other assets and that they intend to liquidate an additional $4.6 billion worth of properties to assist recover customer payments. It's unclear how much cryptocurrency and cash will be found, per court records.

FTX also disclosed they've lost $415 million in cryptocurrencies to hackers after filed for bankruptcy in November, according to Reuters, despite discovering billions.

Also, FTX's new management is requesting the return of millions of dollars in political and philanthropic donations, albeit this could present difficulties as many of the funds had already been used. A task team has also been established to investigate restarting FTX.com.