He was earlier hailed as the next Warren Buffet. He had made a fortune and amassed over $16 billion at just 30 years age, making him the youngest cryptocurrency billionaire. He even survived this year’s crypto crash, or it seemed until this week. Sam Bankman-Fried’s fortune has been wiped off 94 per cent overnight, and his crypto exchange FTX.com is staring at uncertainty after a saviour that had emerged to bail him out of the latest crypto crash, has since backed out.
A graduate of the Massachusetts Institute of Technology, Bankman-Fried worked as a trader on the Wall Street before starting his own trading firm Alameda Research in 2017. Two years later, he launched crypto exchange FTX.com. In a short period of time, FTX became one of the top platforms for trading in crypto derivatives. According to some reports, FTX.com was valued at almost $40 billion in early 2022.
As latest as Monday, the fortune of Bankman-Fried, or SBF as he is known on social media, was worth over $15 billion. By Tuesday, his fortune had been wiped off almost 94 per cent to a little under $1 billion. Just as his rise was meteoric, his near collapse was even more stunning.
What led to the crash?
Crypto markets have seen sharp corrections this year. The largest cryptocurrency Bitcoin fell below $16,000 level for the first time in two years on Wednesday.
The latest crash in the crypto world comes on the back of developments over the last few days around FTX. Over the weekend, Changpeng Zhao (CZ), who runs Binance, the world’s biggest crypto exchange, tweeted that he was selling his holdings in the FTT token. This is the token issued by FTX.
Then a news report emerged that lot of assets of Bankman-Fried’s Alameda Research were in fact in the FTT token. That led to a further sell-off in FTT and as its value fell concerns started emerging about the condition of FTX.com.
On Tuesday, Zhao tweeted that FTX had asked for help, “there is a significant liquidity crunch.” Zhao, further said, that to protect users, Binance had signed non-binding letter of intent, “intending to fully acquire FTX.com.”
Binance, actually had announced an investment in FTX in 2019. The proposed deal announced on Tuesday, would have seen it completely take over FTX.com.
The fall in the value of FTX token and the news of Binance’s plan to acquire FTX, led to the drop in Bankman-Fried’s fortunes overnight.
On Wednesday, however, Binance walked away from the deal to acquire FTX.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance said.
“Sad day. Tried, but” Zhao tweeted later.
In the past Bankman-Fried had extended his hand to save other firms amid the crypto market crash. According to a Reuters report in July 2022, Bankman-Fried had said that he and his firm still had a “few billions” to shore up struggling firms. Mistakes made then perhaps led to Bankman-Fried’s eventual downfall.
With Binance backing out, there will be clear concerns on the future of FTX and its founder Bankman-Fried, and it would have to be seen if any other white knight emerges to save it.
On September 09, 2021, price of the FTX token had hit a life high of $84.18. Its now trading under $3, according to CoinDesk.
Meanwhile, FTX.com has suspended all onboarding of new clients until further notice. On the website, there is also a warning upfront that “FTX is currently unable to process withdrawals. We strongly advise against depositing.”
The 94 per cent wipeout in Bankman-Fried’s fortunes is the biggest single-day collapse among billionaires, according to Bloomberg. Bankman-Fried has told investors unless there is a cash injection, FTX.com may have to file for bankruptcy, Bloomberg reported.
Crypto currency is a very volatile world. Over the last few years, cryptocurrencies have soared sky-high, but also crashed back to earth only to rise again. Amid this roller coaster ride, many people have made fortunes, but many have also been gutted.
The future of Bankman-Fried and FTX could well unravel soon.
