Only a few weeks ago, Sam Bankman-Fried was regarded as crypto’s John Pierpont Morgan, willing to risk his vast fortune to save the industry.
SBF, a 30-year-old with curly hair, was everywhere, backing floundering projects like BlockFi, Voyager Digital, and Celsius. He invested in Robinhood Markets Inc. from the Bahamas, fueling speculation that he would take over the trading app. So why not? He recently stated that once his FTX grew large enough, it could swallow CME Group Inc. or Goldman Sachs Group Inc.
And he appeared to be poised to use his fortune — $26 billion at its peak — to shape the world, donating millions to Democrats and promising to give it all away one day to political causes and charity. Everything’s future is now in doubt.
In a matter of days, it became clear that Bankman-Fried and FTX were in the midst of a liquidity crisis and required their own bailout. Changpeng Zhao’s Binance swept in to take over, and while exact terms were not disclosed, SBF’s $15.6 billion fortune is likely to be wiped out at the hands of his billionaire rival.
This may come as a surprise to investors such as Softbank Vision Fund, Singapore wealth fund Temasek, and Ontario Teachers’ Pension Plan, who sunk $400 million into the exchange in January at a $32 billion valuation. But it also made the rest of the crypto industry take notice: if SBF isn’t safe, who is?
According to the Bloomberg Billionaires Index, Bankman-53% Fried’s stake in FTX was worth approximately $6.2 billion prior to Tuesday’s takeover, based on that fundraising round and the subsequent performance of publicly traded crypto companies. He disclosed in May that he had purchased a 7.6% stake in Robinhood. After Binance agreed to acquire FTX, shares of the online brokerage fell 19% on Tuesday, and were down another 5% at 9:39 a.m. in New York.
However, FTX was not Bankman-most Fried’s valuable asset. Alameda Research, his crypto trading firm, contributed $7.4 billion to his personal fortune.
The Bloomberg wealth index assumes that existing FTX investors, including Bankman-Fried, will be completely wiped out by Binance’s bailout, and that Alameda is to blame for the exchange’s problems. As a result, FTX and Alameda are both assigned a $1 value.
SBF’s net worth is now around $1 billion, down from $15.6 billion on Tuesday. The 94% drop is the largest one-day drop ever recorded among billionaires tracked by Bloomberg.
Alameda was founded by Bankman-Fried, a former Jane Street trader, and Gary Wang, a former Google engineer. They discovered a niche: arbitraging pricing differences in cryptocurrencies across countries, and they quickly expanded into a variety of quantitative crypto trading strategies.
It appeared to be extremely profitable. Bloomberg reported in September that the firm made approximately $1 billion in 2021. However, questions remained about how FTX and Alameda interacted.
Then Zhao, also known as CZ, assisted in the demise of his main rival and former disciple.
According to CoinDesk, a token issued by FTX, FTT, accounts for roughly a quarter of Alameda’s $14.6 billion in assets. Another $2.16 billion item was labeled “FTT collateral.”
In response to the revelations, Zhao apparently tweeted that his exchange would be liquidating its FTT holdings. Since then, the token’s value has dropped by roughly 80%.
CZ appears to be preparing to add FTX to his own empire. With a fortune estimated at $16.4 billion, he is already the richest person in cryptocurrency. According to the Bloomberg wealth index, his net worth peaked at $97 billion in January.
The acquisition of Binance does not include FTX.US, a separate exchange that is also majority-owned by Bankman-Fried. In a January fundraising round, FTX.US was valued at $8 billion.
It’s unclear what impact the collapse of its international affiliate will have on the US-based exchange, but it demonstrates “how fragile this world is,” according to Bloomberg Intelligence analyst Paul Gulberg. It’s “surprising and frightening to some extent.”