Nov 11 (Reuters) – Sam Bankman-Fried earned a reputation as the savior of the crypto industry when he rescued two platforms earlier this year. But when FTX, the exchange he co-founded and ran until Friday, needed a lifeline, none came.
Until this week, the 30-year-old American was seen as a digital asset brat who amassed billions in personal wealth by running one of the world’s largest crypto platforms. But when traders rushed to withdraw funds from FTX, Bankman-Fried refused, telling investors he was convinced the business would be bailed out, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. He apologized, repeatedly.
“Nobody was saying something was wrong with SBF,” said Marius Ciubotariu, co-founder of the Hubble protocol, a decentralized lending platform. The company’s collapse caught markets by surprise because Bankman-Fried was seen as a business-savvy founder and adept at striking deals, he said.
Known in financial circles by his initials, SBF, Bankman-Fried had become an unconventional and prominent figure in the industry. He sported his trademark tousled hair, T-shirts and shorts on panel appearances with statesmen including former US President Bill Clinton and former British Prime Minister Tony Blair, as well as supermodel Gisele Bundchen. Bankman-Fried also quickly became one of the largest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.
The crypto wunderkind began his career at Jane Street Capital, a choice he says was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.
He amassed a fortune, estimated at $26.5 billion by Forbes a year ago, by taking advantage of bitcoin price differences in Asia and the United States. Bankman-Fried eventually founded the cryptocurrency trading company Alameda Research in 2017 and founded FTX a year later. It was valued in january at $32 billion.
The collapse of FTX sent Bitcoin plunging to a two-year low this week amid concerns that the company’s troubles will spread to other crypto businesses. Employees were shocked by his collapse, with some sending apology notes to customers expressing shock at what happened, according to a person familiar with the matter.
FTX named John J. Ray III, a turnaround expert, as chief executive officer on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed into scandal and bankruptcy in 2001.
“A lot of people have compared this to Lehman; I would compare it to Enron,” former Treasury Secretary Larry Summers said in an interview with Bloomberg TV.
For all his recent endorsements from celebrities, notoriety, and big-name sponsors, Bankman-Fried was wary of FTX’s prospects in its early days.
“I thought we would fail,” Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would use it.”
Reporting from Hannah Lang in Washington; additional reporting from Anirban Sen in New York; Edited by Lananh Nguyen and Stephen Coates
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