A shot shot with a drone allows you to admire it attic overlooking the turquoise waters of the Bahamas. A gentle breeze laps some tropical palms and ferns that inspire nothing but a paradise on earth. Last January, Sam Bankman-Fried opened his doors to an influencer for a short video. We discover this chubby face, these thick curly hair and this careless look characteristic of the little geniuses of technology. “I’ve always wanted to be rich,” she confides with a strange placidity. “SBF”, 29 years old, therefore weighs about 17 billion dollars, and its cryptocurrency exchange platform, FTX, not far from double. Which is not an end in itself. “I don’t like money, I wish I could give everything to charity.” Sam talks about “effective altruism”, a life concept devised by his friend and philosopher William MacAskill, which can be summarized as follows: the more money you make, the more you can give, the more you have. the world. CQFD.
Sam Bankman Fried recites in Miss contest style the causes that are close to his heart: ecology of course, and health. “We have to be ready for the next pandemic.” He has, at this time, shared “only” $50 million of his immense fortune. But Sam still has it under his feet. His skin shows no trace of a tan. He sleeps little, spends his time in front of curves and graphs, or playing games League of Legends ; sometimes both at the same time. The Bahamas is just the place of registration of your FTX company. This son of two excellent law professors benefits from the archipelago’s fiscal flexibility. Sam could thus become the first trillionaire on the planet, comments the influencer in an advertising voiceover tone. The latest evolution of former software salesman turned philanthropist, Bill Gates. A white knight.
The harder the fall
Monday November 14th on Twitter. SBF writes one by one the letters that form the expression: what happened (What just happened?). His empire is sunk because of him and finds itself ruined. Eight billion dollars are missing from the coffers of the trading platform. Sam is still in the Bahamas, but under the supervision of the authorities. A real introductory scene to a sequel of the saga very bad trip. Even many small investors have a hangover. Also stars from the world of sport such as the American footballer Tom Brady who had entrusted FTX with 600 million dollars. The platform where you can buy bitcoin, ethereum and hundreds of others corners, produced billions of digital assets with five million users. Basically to buy and then resell those same tokens once they gain in value. “Business”. Why it should be remembered: cryptocurrencies are still very little used to pay for anything. Everyone is there to make money, first Sam.
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In 2017, two years before FTX was founded, Sam Bankman-Fried founded Alameda Research for just this purpose. The firm specializes in “quantitative trading”. He invests heavily in the financial markets. It was her child, who allowed her to make her fortune with a clever maneuver. SBF discovers that bitcoin sells more in Southeast Asia than in the US. Then buy the most popular cryptocurrency on the second market to resell it on the first. Bankman-Fried racks up his first millions on a system glitch and launches FTX. He entrusts the management of Alameda to Caroline Ellison, known within the trading company Jane Street, the first respective professional experiences after leaving the prestigious Massachusetts Institute of Technology (MIT), where they were trained. The American media lends them a romantic relationship.
FTX is the second stage of the Bankman-Fried rocket. The company is experiencing extremely rapid growth thanks to Covid-19, which broke out a few months after its creation in November 2019. The health crisis has boosted our use of digital technology, a precious escape route in times of confinement. At the same time, it has stimulated public interest in cryptoassets, seen as the future currencies of the web. Well, trading platforms like FTX, Binance or Coinbase allow you to acquire these digital assets and keep them, without any particular computer skills. These “facilitators” also benefit, at the moment, from the considerable liquidity present on the market, which allows them to be subsidized. In addition to helping newbies, these platforms are also developing new products for industry professionals, which are rolling towards “decentralized finance”, DeFi. The result: a wave of traders like Sam is investing in cryptocurrencies. SBF is a great success story for them.
This alignment of planets apparently makes FTX too big to fail (too big to fail). Last spring, it took the liberty of bailing out friends in dire straits, following the lead of crypto-asset savings and loans specialist BlockFi. In August, the business magazine Fortune makes his One on Sam: “Is he the next Warren Buffet?”, this American multibillionaire, pope of investments for more than 50 years. The timing is ideal. Crypto survived a spring crash, the market appears to be on the mend. bad seeds such as Do Kwonthis arrogant South Korean entrepreneur who managed the feat of sealing a “stable” cryptocurrency, pegged to the dollar, are out of order. The crooks pulled down. The US Congress invites SBF twice this winter to evoke the regulation of the sector. He promotes more transparency in a suit and tie, reinforcing his position as a man of confidence, with politicians overwhelmed by the jargon and mysteries of this new world. In the sector, however, he makes you shiver. For many pro-cryptos, blockchain aims to disrupt the current monetary and financial system. Don’t conform.
“I was wrong”
On November 2, an article on the specialized site CoinDesk alarmed: “The ties between FTX and Alameda Research are exceptionally close”. The media reveals that his funds, in case of losses, are mainly secured by the FTT cryptocurrency, which also belongs to FTX. A very risky practice. Do Kwon and his stablecoin crashed for a similar reason. Another stable token, Tether, the most used in the world, was sanctioned after an audit of its reserves, which were deemed insufficient to cover any massive withdrawals. Many immediately understand the danger of this mechanism. In particular Changpeng Zhao, alias CZ, boss of Binance, neither more nor less than the world’s largest trading platform ahead of FTX. The latter announced on November 6 that it was selling part of its FTT for security reasons.
A group of followers imitates him (just one click). The value of the token plummets, sinking Alameda, then FTX, in a predictable avalanche effect. IG France analyst Vincent Boy ventures the comparison with L’Express: “It’s a bit as if in France BNP Paribas had hired a bank run, a flight of capital, to Société Générale”. After falling to zero, SBF apologizes. “Sorry, I screwed up”. In the turmoil, the pirates get their hands on 600 million euros. 11 November, bankruptcy is declared By a bad manager, SBF is suspected of fraud within hours. New York Times reveals that Alameda, which had suffered significant losses prior to the summer, was bailed out by FTX client funds. The writing of Fortune Nonetheless, congratulations are due for placing this question mark.
Sam Bankman-Fried’s alleged fraud marks today’s full-fledged return to the cryptocurrency world. His ratings have returned to pre-Covid levels. However, the tremors caused by the fall of FTX could be felt for weeks or even months. SBF evaporated billions, broke the trust of users, investors. “I’ve never heard of him”, judges the French entrepreneur Réda Berrehili, who compares him to Jordan Belfort, the “wolf of Wall Street”. He congratulates himself for not listing his Ki token, on FTX, as the now dark knight in the middle had personally asked him to do on Telegram messaging.
One question remains: How have venture capitalists – who have never worn their names so well – been able to invest heavily in FTX and its Web3 vision? Sequoia Capital, or SoftBank, well anchored in the traditional economy, has richly supplied Sam Bankman-Fried’s portfolio. Huge stadiums across the US have accepted FTX money for sponsorship. The Democratic and Republican parties have raised money donated by SBF for their campaigns. No one has ever found fault with him. Because the crypto money kept flowing. And because there is no strict control of the sector, probably to prevent Sam Bankman-Fried from doing as he sees fit. Even less under the Bahamian sun.
The Chronicle of Christophe Donner