Sam Bankman-Fried’s massive bet deceived everyone.

A conviction has been delivered against Sam Bankman-Fried for the theft of billions of dollars from the clients of his cryptocurrency exchange, FTX. Silicon Valley’s disheveled prodigy, who mingled with luminaries such as Tom Brady and Gisele Bรผndchen, has experienced a spectacular downfall.

A Calculated Decision

As his empire began its irreversible, dazzling collapse on November 7, 2022, Bankman-Fried, as usual, did what he always did: he assessed the odds.

A competitor executive had earlier that day expressed apprehensions regarding the financial state of Bankman-Fried’s cryptocurrency exchange on social media, inciting a panicked flight of customers worth billions of dollars.

Bankman-Fried consulted two of his most senior subordinates via online chat. “Are you sure that the tweet is negative on the whole?” he inquired.

They considered their alternatives. Could his competitor possibly retract the criticism? Did that have a reasonable chance of stopping the bleeding? “Pretty improbable,” wrote Bankman-Fried.

It was the kind of calculation Bankman-Fried had been developing for years: friends claimed he used these quick equations in almost every situation, including assessing a risky trade and contemplating a breakup.

It appeared that way for a time. Bankman-Fried, regarded as the crypto boy wonder, amassed an estimated $26 billion in personal fortune, numerous magazine covers, and extensive political influence in an almost unprecedented manner. Moreover, the flameout accelerated.

The Unraveling

The tweet was, as previously stated, extremely negative. The platform generated billions of dollars in less than five days. The company was insolvent and had lost over $8 billion in customer funds by the time everything was said and done. Five weeks later, Manhattan prosecutors indicted the resigned Bankman-Fried on multiple financial charges, including wire fraud, securities fraud, commodities fraud, and money laundering.

Amidst a four-week trial, two conflicting narratives surfaced. The former magnate, in one sense, was an exceptionally talented yet unfortunate genius, whose oversight as CEO enabled enormous-scale fraud to transpire clandestinely. Bankman-Fried, backed by former members of his inner circle, engaged in the illicit transfer of billions of dollars from customers’ accounts. He did so with the conviction that he would evade apprehension.

Both accounts demonstrate the profound dependence of FTX’s success on the reputation of its founder, whose peculiar allure captivated former presidents, public figures, and business magnates alike, all while he engaged in a multibillion-dollar venture.

Bankman-Fried had no qualms about his desire to amass wealth. However, he claimed that his sole intention in earning those billions was to subsequently donate them.

Born to two ambitious parents, Bankman-Fried and his younger sibling were early indoctrinated with the ethical principle of utilitarianism, which posits that the most morally sound decision is the one that maximises overall well-being for the greatest number of individuals.

Bankman-Fried attended a lecture by Will MacAskill, a 25-year-old Oxford doctoral student and founder of effective altruism, a philosophy with utilitarian undertones that employs mathematics to determine how individuals can maximise their philanthropic impact, while she was a student at MIT.

A Philanthropic Vision

According to Mr. MacAskill, Bankman-Fried could maximise his good deeds by applying his substantial intellect to the lucrative Wall Street sector while donating the majority of his salary to worthy causes.

The sale of Bankman-Fried occurred. In 2014, he reportedly applied his degree directly to the high-frequency trading firm Jane Street and donated roughly half of his income to charitable causes.

Cryptocurrency, which Bankman-Fried discovered three years later, had the potential to make him even wealthier than conventional trading.

He established Alameda Research, a cryptocurrency investment firm, at the age of 25 after observing that Bitcoin prices varied significantly between countries. Alameda reportedly garnered $20 million in arbitrage trading within three weeks.

In 2019, he established FTX, a cryptocurrency exchange situated in Hong Kong that catered to international investors. Similar to Elizabeth Holmes, another Silicon Valley billionaire whose fortunes plummeted, he successfully persuaded renowned investors to provide the company with both financial resources and credibility.

Daring Ambitions and Unconventional Leadership

The FTX’s daily trading volume reached $300 million within months. He made his Forbes 400 debut in 2021, the publication’s yearly compilation of the wealthiest Americans, boasting a substantial fortune of $22.5 billion.

Certain individuals have ascribed his extraordinary achievements to an atypically high risk tolerance. Wherein he was prepared to jeopardise potentially catastrophic outcomes in exchange for substantial rewards.

“He would gladly flip a coin if it landed on tails and caused the destruction of the world,” Caroline Ellison, his ex-girlfriend and former CEO of Alameda Research, testified at his trial. “As long as if it came up heads the world would be more than twice as good.”

Based on internal reports, FTX at times resembled an adult mathematics camp, populated by an assortment of exceptionally talented outcasts and directed by the perpetually rumpled Bankman-Fried.

“A former FTX employee stated, “He was extremely disorganised; he was perpetually in cargo shorts and untidy.” “He would walk around the office in bare feet.”

The employee stated that those at the top were a close-knit group who occasionally listened to Sam without question. “It could be cult-like.”

Natalie Tien, who oversaw public relations and Bankman-Fried’s schedule at FTX for over two years, stated that at times the organization felt “toxic” due to his charismatic nature.

“We had complete faith in him,” she stated. “To a degree that we kind of worried [about] speaking up for ourselves.”

A Charismatic Figure

Individuals both inside and outside the organization found themselves captivated.

Confronting Bill Clinton, Tony Blair, Gisele Bundchen, and Katy Perry in ill-fitting shorts and T-shirts, he assumed the role of an ambassador for the cryptocurrency industry in its nascent stages.

A facet of Bankman-Fried’s aura of mystique was his apparent refusal to indulge in the degree of extravagance that his wealth ought to have enabled. The yacht was not his property, his defence attorneys testified at trial. The car of his was a beat-up Toyota Corolla. In contrast to the majority of his contemporaries, he advocated for increased regulation of the cryptocurrency market during his testimony before Congress.

Zeze Faux, an investigative journalist and author of Money Go Up: Inside Cryptocurrency’s Wild Rise and Staggering Fall, remarked, “In a peculiar way, he resembled the mature in the crypto world.”

Additionally, there was his declared ultimate goal: Bankman-Fried intended to completely relinquish the assets.

Mr. Faux stated, “It was a fantastic story that everyone enjoyed.” “People loved it in Congress, the VCs loved it, the bankers loved it.”

“The problem with his story is that it was not true,” he added.

The magazine of Sequoia Capital, a venture capital firm, published an effusive profile of Bankman-Fried in September 2022. Prior to that period, FTX was worth $32 billion.

Adam Fisher, the author of the since-deleted article FTX’s SBF Has a Saviour Complex, and Perhaps You Should Too, detailed Bankman-Fried’s endeavours to optimise his wealth with the intention of augmenting his global influence. “It entailed a risk,” Fisher composed. “But the maths couldn’t be clearer.”

“In order to maximise its positive impact on society, SBF must devise a course of action that would place him on a coin toss away from complete failure.”

The Unraveling Continues

A month and a half later, CoinDesk, an industry news website, published a startling report claiming that Alameda had invested more than half of its $15 billion portfolio in FTT, the FTX-printed cryptocurrency token. The revelation prompted inquiries regarding the true worth of Alameda’s holdings and the apparent contradiction of interests between the ostensibly separate Alameda and FTX.

Then, on November 6, industry rival and Binance CEO Changpeng Zhao, also referred to as CZ, made the announcement that he would liquidate his own substantial FTT holdings.

With the implosion of FTX on November 11, the prodigious history of cryptocurrencies came to an end.

Certain analysts who had witnessed the cryptocurrency growth and Bankman-Fried’s meteoric ascent to prominence anticipated the decline.

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