Sam Bankman-Fried, a 32-year-old Californian, adopted the role of the repentant before Judge Lewis A. Kaplan at his sentencing hearing, held this Thursday, for the scam of more than $8 billion with his cryptocurrency business. “I made selfish decisions, this haunts me every day,” he said, dressed in the brown prison uniform.
That exculpatory tone contrasts with the one he used in November 2022, when he launched a post to proclaim that FTX’s assets were fine and safe, while he could not meet customer requests. He was arrested shortly after. The short road that goes from glory to hell.
During his short reign as king of the emerging, and volatile, digital currency business, SBF, as he was known, expressed on many occasions the bravery that comes with believing himself to be the master of the universe, like the characters in the novel ‘The Bonfire of the vanities’ by Tom Wolfe.
Michael Lewis in his book about Sam Bankman-Fried (‘Going infinite’, rise and fall of a new tycoon), describes him as “the golden boy of cryptocurrencies.” In this biography he explains that the founder of FTX wanted to pay Donald Trump to resign from running in the 2024 elections. He saw him as a threat to democracy.
Without clarifying the source, Sam told him that Trump was asking for 5 billion to quit politics. In his conversations, Lewis concluded that Bankman-Fried was easily distracted, jumped from one thing to another, was a game obsessive, careless, eccentric, good at calculating probabilities. He was ranked 41st on Forbes’ list of the 400 richest Americans.
His passion for video games deserves a special mention because he let himself be carried away by his hobby in the company of journalists, in meetings with investors, in serious conversations and it is even notable that he started playing during a zoom call with Anna Wintour, the all-powerful lady. of the fashion business.
His mother, seeking mercy, argued this Thursday in the Manhattan courtroom that her son was a genius, a prodigious intelligence, with all that that entails, and, above all, a good son. The judge detected a lot of motherly love. Because he saw SBF as someone who had made bad decisions, knowing that he was delving into criminal territory by betting with other people’s money. Things of greed and arrogance, in the words of the prosecutor.
That is the distance between the end of 2022, before his empire collapsed like a house of cards collapses, and the sentence of two and a half decades in prison. In the judicial summary for fraud and money laundering there is not a trace of the man who was the fashionable man on the covers of the most glossy magazines, who rubbed shoulders with legislators, celebrities or movie stars, who presented himself as a great altruistic for just causes.
Among other residences, he spent a lot of time enjoying his $35 million+ penthouse in the Bahamas. Today his lawyers are fighting to have him transferred from the hole in the Brooklyn jail where he is being held to a safer prison, that is, with more comforts.
His downfall made Bankman-Fried the symbol of unbridled greed and shady deals that made digital currencies a multibillion-dollar industry during the pandemic. When he punctured FTX it was a burst of the bubble. He dragged many other cryptocurrency companies into bankruptcy and caused the United States government to have to take action on the matter.
He built Wild West-style financial engineering to boost the expansion of digital currencies. This attracted many inexperienced investors, who lost their savings when the market collapsed. It also affected celebrities such as former president Bill Clinton, actor Orlando Bloom and model Gisele Bündchen. The issue pivots on the culture of lifelong scams, although on an overloaded scale due to the characteristics of cryptocurrencies.
Bankman-Fried began his career as a stock trader at Jane Stree Capital, after studying mathematics and physics at MIT in Massachusetts. In 2017 he left that firm and set up his own cryptocurrency coverage business that he named Alameda Research. His first office was at a two-bedroom Airbnb in North Berkeley, California.
His entrepreneurial capacity seemed to have no limits. In 2019 he was the co-founder of the digital currency exchange FTX with which he achieved global fame. He named himself executive director.
During the trial last November, he explained that he “basically knew nothing” about cryptocurrencies. “I was only clear that it could be traded,” he explained. But when he was still a winner he gave another version and commented that he had studied buying and selling a lot. of bitcoins. “Only a 20% chance was already a great opportunity,” he said to give himself importance as a visionary.
He then hired Caroline Ellison, a former colleague at Jane Street, as an Alameda trader. She became the first executive director of the firm and his girlfriend. She also became the prosecution’s main prosecution witness. She testified that she and others carried out crimes at Bankman-Fried’s direction.
In January 2022, when digital currency prices were near their all-time high, FTX had a valuation of $32 billion, with high-profile investors such as SoftBank and BlackRock. The leader decided to move and the headquarters of his two companies left Hong Kong and moved them to the Bahamas, which collects much lower corporate taxes than in the US, a friendlier regulatory environment “and one of the few places that offers a comprehensive framework for cryptocurrency,” he noted.
It only took a few months, in November of that year, for their companies to file for bankruptcy when they experienced a massive loss of their financial network and could not meet their clients’ requests to withdraw investments. Although he wanted to pretend that everything was fine, the disaster was irremediable and in December he was arrested.
Since his fraud emerged, the shadow of Bernie Madoff, wealth manager and author of a multimillion-dollar pyramid scheme that was partly echoed in the Bankman-Fried scam, has been cast over him.
Ira Lee Sorkin, a lawyer who defended Madoff, commented before the cameras that he had not been surprised by the 25-year sentence imposed on SBF. He described it as harsh, although it is much shorter than the century and a half that he received in 2009, when he died in prison. “He is 32 years old and will see the light of day, but he is going to spend a lot of time in a cell,” he concluded. Bankman-Fried was taken away handcuffed and escorted.