The Rise and Fall of the ‘Cryptocurrency King’ That Rocked the Market

In just eight days, Sam Bankman-Fried, 30, who was nicknamed the “King of Cryptocurrencies”, declared his company, FTX, bankrupt, stepped down as CEO and now must be investigated in the United States for the way he handled it. the company’s finances.

In recent years, the internet has been flooded with lengthy interviews of Bankman-Fried from his office in the Bahamas.

In some of these videos, you can hear an annoying clicking noise.

As Bankman-Fried tells his incredible story of how he became a billionaire in five years, you hear the insistent, fast-paced sound that seems to come from his mouse.

During the interview, the young businessman’s eyes roam the screen.

It is not clear from the videos what he is doing on his computer, but in posts on Twitter he revealed the mystery.

“I’m famous (or infamous) for playing League of Legends while on the phone,” he tweeted in February 2021.

Bankman-Fried — now a former head of the FTX cryptocurrency exchange — is a compulsive video game player. And in a series of tweets to his nearly one million followers, he explained why. The game served as an outlet in his stressful day to day life, in which he ran two companies that traded billions of dollars a day.

“Some people drink; some people gamble. I play League,” he said.

After his cryptocurrency empire collapsed last week in dramatic fashion, another story of his has resurfaced on the internet.

According to a blog post by venture capital giant Sequoia Capital, Bankman-Fried played a League of Legend battle during a high-profile video call with Sequoia’s investment team.

And that doesn’t seem to have angered Sequoia. The group invested $210 million in Bankman-Fried’s FTX.

This week, Sequoia Capital deleted that blog post and announced that it will book its investment in FTX as a loss.

They aren’t the only investors who have lost huge sums since the collapse of Bankman-Fried’s $32 billion empire.

FTX had around 1.2 million registered users who used the cryptocurrency exchange to buy cryptocurrency tokens like bitcoin and thousands of other assets.

From big traders to small crypto enthusiasts, many are now wondering if they will be able to recover their savings tied to FTX digital wallets.

The dramatic rise and fall of Bankman-Fried is a story filled with daring risk-and-reward play.

Bankman-Fried was a student at the Massachusetts Institute of Technology (MIT) — the famous American university — where he studied physics and mathematics.

But the brilliant student says it was the lessons learned in student dormitories, not classrooms, that led to his fortune.

In an interview with the BBC last month, he said he was influenced by the “effective altruism” movement. Effective altruism is a community of people who “try to figure out what they can practically do with their lives to have the greatest possible positive impact on the world,” according to Bankman-Fried.

He says that he decided to enter the banking sector to earn as much money as possible and direct it to good causes.

He learned to trade stocks for a short time at Jane Street in New York, before getting bored and moving on to bitcoin.

He noticed that there were wide variations in the value of bitcoin on different cryptocurrency exchanges and began arbitrage — buying bitcoin from places that sold it cheaply and selling it in other places where it was more expensive.

After a month of modest profits, he reunited with college friends and founded a company called Alameda Research.

Bankman-Fried says his start was not easy, and it took him months to perfect techniques for moving money in and out of banks and across countries. Finally after three months, he and his small team hit it big.

“We were very strong-willed,” he told the Jax Jones and Martin Warner Show podcast last year. “We just kept going. When an obstacle came up, we were creative and if our system couldn’t handle it, we built a new system to get over it.”

In January 2018, his team was making $1 million a day.

A CNBC reporter recently asked how he felt in the midst of it all.

Bankman-Fried said it all “made sense” within their methodology. “But it surprised me every day,” he said.

Sam Bankman-Fried officially became a billionaire in 2021 thanks to the second business he founded: FTX. The cryptocurrency exchange has grown to become the second largest in the world and an industry giant, with $10 to $15 billion traded daily.

In early 2022, FTX was valued at $32 billion. The company had become famous among the general American public. The NBA’s Miami Heats basketball stadium bears the company’s name: FTX Arena. Celebrities like model Gisele Bündchen and football star Tom Brady have invested in FTX.

Bankman-Fried seemed happy to show off his lifestyle to his Twitter followers. He mostly sleeps on a beanbag next to his desk in the office. One photo shows him sleeping like this, with his team working around him.

In another image, in the early hours of the morning, he wrote: “Couldn’t sleep. Back in the office.”

Bankman-Fried’s dream of donating large amounts of money to charity was also well underway. In the BBC interview last month, he said he had already donated “a few hundred million”.

And his generosity didn’t just extend to charities. In the last six months, the “King of Cryptocurrencies” has been given another nickname: “White Knight of Crypto”.

With the price of cryptocurrencies falling during 2022, the so-called “Crypto Winter” continues. Other companies in the sector began to fail, but Bankman-Fried continued to distribute hundreds of millions of dollars in aid to companies facing bankruptcy.

Asked why he was trying to prop up failed cryptocurrency companies, he told CNBC: “It’s not going to be good in the long run if we have real pain. And it’s not fair to customers.”

He also claimed he had $2 billion in reserve that he could use to help bankrupt cryptocurrency companies.

But last week he was trying to raise money to save his own company and his customers.

Doubts over FTX’s financial stability began to surface after an article on the CoinDesk website suggested that part of Bankman-Fried’s trading giant Alameda Research was financed by a currency invented by an FTX group company rather than an asset. independent.

The Wall Street Journal published accusations that Alameda Research used FTX customer deposits for loans.

The beginning of the end came when FTX’s main competitor — Binance — sold all of its FTX-linked cryptocurrency tokens.

Binance CEO Changpeng Zhao told his 7.5 million followers that his company would sell the FTX stakes “in light of recent revelations”.

This set off a panic, with FTX customers pulling billions of dollars off the exchange.

Withdrawals stopped and Bankman-Fried tried to get a ransom from Binance, even considering buying the rival.

Binance said that reports of “mishandled client funds and alleged investigations by US agencies” influenced its decision to back out of closing a deal with FTX.

The next day, FTX filed for bankruptcy.

Bankman-Fried apologized in a series of tweets: “I’m sorry again that we’ve reached this point.”

“I hope that everything can have a way of recovering. I hope that this can bring some transparency, trust and governance.”

He said he “was shocked to see things unfold the way they did.”

Such is the world of cryptocurrencies. The price of bitcoin has dropped to its lowest in two years and many are now wondering: if FTX could go downhill with its iconic leader, who will be the next to fall?

This text was published here.