Yi Fei Ke
Professor Margaryan
CRJ 102 – 110W
March 4, 2024
Sam Bankman-Fried was well known for founding one of the largest cryptocurrency exchanges in the world, FTX. He was a big donor for the Democratic Party and also known for his philanthropy. Through how large and popular FTX became for cryptocurrency investments, Bankman-Fried’s net worth at its peak estimated at around $22.5 billion. However, he was arrested on December 12, 2022, and was charged with seven counts of wire fraud, securities fraud, and money laundering. Bankman-Fried resigned from FTX as it collapsed and filed bankruptcy the month before his arrest. How did Bankman-Fried become one of the richest people in the United States at only the age of 30, and what did he do that led to the collapse of FTX and being charged for numerous crimes?
The article “Sam Bankman-Fried’s Arrest is the Culmination of an Epic Flameout” by Whizy Kim goes over his rise to success to his arrests and charges up to December of 2022. As a son of two professors at Stanford University, he was very academically gifted. He majored in physics at MIT but was then influenced by Will MacAskill who was an Oxford professor with altruistic ideas to make more money by working for a trading firm. His belief of being an effective altruist was to make as much money as possible to give away. After gaining experience from working on Wall Street in 2013, he later gathered a few others to make his own trading firm, Alameda Research in 2017. Then he launched his own cryptocurrency exchange in 2019 called FTX which is short for Futures Exchange. FTX quickly gained in popularity with how it allowed investors to make risker trades using more leverage than most other exchanges allowed. FTX had another surge in popularity due to Bankman-Fried paying many well-known celebrities such as Tom Brady and Shaquille O’Neal to do endorsements for him, FTX even aired Superbowl commercials. He also signed the Giving Pledge, “joining the ranks of other billionaire mega-philanthropists like Warren Buffett, Bill Gates, and MacKenzie Scott in a commitment to give away at least 50 percent of his wealth” (Kim, 2023). He even promised to give away 99% of his fortune. Since Bankman-Fried was a big Democratic Party supporter, he was the sixth largest individual donor to Joe Biden’s campaign. Things were looking great for Bankman-Fried but soon his wealth, FTX, and Alameda Research would be in ruins.
In “The Fall of FTX and Sam Bankman-Fried: A Timeline” by Eric Mack, Mack gives a detailed timeline of the fall of FTX and Bankman-Fried up to February of 2023. On November 2, 2022, financial information leaks from Alameda Research showed that it had a very close relation with FTX. This was very concerning because “Essentially, billions of Alameda’s value can be traced to a cryptocurrency that sister company FTX creates” (Mack 2023). Alameda Research’s CEO at the time was Caroline Ellison who was formerly in a relationship with Bankman-Fried. Binance is another popular cryptocurrency exchange and on November 6, 2022, they announced they would sell off their holdings of FFT. FFT was FTX’s native token, and each was valued at around $22 at the time. Two days later the price of FFT would drop to less than $6, and Binance entered into a non-binding agreement to buy FTX completely. This would spark an investigation by federal U.S. agencies. The volume of traders rushing to withdrawal billions of dollars from the platform within only 3 days would spell the end for FTX. On November 11, 2022, FTX and Alameda Research filed for bankruptcy, and Reuters later reports that at least $1 billion in FTX customer funds cannot be accounted for. Bankman-Fried is arrested in the Bahamas on December 12, 2022, and extradited to the United States. He is being charged with many crimes and he was convicted of fraud. The fraud charge was from him allegedly defrauding customers. A federal jury convicted him as part of a conspiracy to extract more than $8 billion from FTX customers and secretly funneling this money into Alameda research. Due to the nature of his crimes, he faces up to 110 years in prison.
In a very recent article titled “Sam Bankman-Fried Makes His Last Stand” by David Yaffe-Bellany and Matthew Goldstein, gives more recent information on his case. Currently he is still fighting for a lighter sentence for his case and is preparing to appeal his conviction. Since 2023 Bankman-Fried hired Marc Mukasey who once represented former president Trump as his lawyer. Bankman-Fried maintains that he is innocent, however, even if the judge does not give him the maximum sentence, he could still face decades behind bars. His crimes are very serious and “Mr. Bankman-Fried faces long odds. Criminal convictions are rarely overturned on appeal” (Yaffe-Bellany and Goldstein 2024). Bankman-Fried’s sentencing by federal judge, Lewis A. Kaplan, will be on March 28, 2024.
References
Chow, A. R. (2023, November 2). Sam Bankman-fried found guilty: How it happened. The Bombshell Evidence That Led to Sam Bankman-Fried’s Conviction. https://time.com/6330323/sbf-trial-biggest-bombshells/
Kim, W. (2022, December 22). Sam Bankman-Fried’s arrest is the culmination of an epic flameout. Vox. https://www.vox.com/the-goods/23458837/sam-bankman-fried-ftx-sbf-downfall-explained\
Mack, E. (2023, February 24). The fall of FTX and Sam Bankman-Fried: A timeline. CNET. https://www.cnet.com/personal-finance/crypto/the-fall-of-ftx-and-sam-bankman-fried-a-full-timeline-of-events/
Yaffe-bellany, D., & Goldstein, M. (2024, February 27). Sam Bankman-fried makes his last stand. Sam Bankman-Fried Makes His Last Stand. https://www.nytimes.com/2024/02/27/technology/sam-bankman-fried-fraud-ftx.html
