Inside Sam Bankman-Fried’s Multi-Billion Dollar FTX Fraud
Sam Bankman-Fried got into the world of cryptocurrency at the age of 25. (File)
Former cryptocurrency billionaire Sam Bankman-Fried, 32, has been sentenced to 25 years in prison for his involvement in a major financial scam related to the collapse of the FTX crypto exchange. He was found guilty in November on seven counts, including fraud, conspiracy, and money laundering.
How Sam Bankman-Fried pulled off the scam
Bankman-Fried got into the world of cryptocurrency at the age of 25. He founded a company called Alameda Research and soon realised he could make a lot of money by exploiting differences in Bitcoin prices between different countries.
This strategy, called arbitrage trading, earned him $20 million in just three weeks, according to BBC. He launched FTX in 2019, a crypto exchange in Hong Kong that attracted investors due to his charismatic personality and promises of big returns.
His ex-girlfriend, former CEO of Alameda Research, Caroline Ellison, described him as an extreme risk taker, saying, “He would be happy to flip a coin, if it came up tails and the world was destroyed, as long as if it came up heads, the world would be more than twice as good.”
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Bankman-Fried, known for his casual dressing style and disorganisation, had a loyal following within FTX, prompting some to compare their loyalty to him as almost cult-like. Even external observers, like venture capital firm Sequoia Capital, saw him as a visionary striving to make a positive impact.
But cracks began to appear in Mr Bankman-Fried’s empire when reports revealed conflicts of interest between his companies, raising doubts about their integrity. The confidence in Bankman-Fried’s ventures further dropped when a rival announced plans to sell off holdings in FTX’s crypto token.
Despite claiming to have altruistic motives, Mr Bankman-Fried was slammed when it was revealed that Alameda, his company, had a large investment in FTT, the token issued by FTX. This sparked concerns about conflicts of interest between the two companies.
FTX ultimately collapsed in November 2022.
Sam Bankman-Fried’s downfall
The downfall began on November 7, 2022 when a rival executive tweeted about FTX’s financial stability, triggering panic among customers and sparking a massive bank run that drained billions from the platform. Despite efforts to stem the bleeding, the damage was irreversible, resulting in over $8 billion in missing customer funds and the bankruptcy of the company.
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During Mr Bankman-Fried’s trial, two conflicting narratives emerged about his involvement, with some calling him a brilliant but unwitting CEO, while others accusing him of knowingly siphoning billions of dollars of customer money.
Regardless, the collapse revealed the extent to which FTX’s fortunes were tied to its founder.
