As recently as the summer of 2022, Sam Bankman-Fried was the boy-wonder face of crypto: a 30-year-old who founded one of the biggest cryptocurrency exchanges in the world, a celebrated philanthropist worth an estimated $16 billion, and a major Democratic donor who quickly found favor in Washington. By early November, he was at the center of an epic flameout that left his empire and his image as an uncannily sharp, altruistic billionaire in ruins.
In December, Bankman-Fried was arrested in the Bahamas and charged with wire fraud, securities fraud, and money laundering, among other things; he has since been extradited to the US and released from jail on a $250 million bond — according to Reuters, the largest-ever pretrial bond. A trial date has not been set, but it is expected to take place in the Southern District of New York. Caroline Ellison and Gary Wang, two former top executives at Bankman-Fried’s companies, have pleaded guilty to several fraud charges and are cooperating with federal prosecutors in the investigation. The Securities and Exchange Commission has also separately charged Bankman-Fried, Ellison, and Wang with defrauding FTX investors.
In the annals of crypto disasters, the tale of Bankman-Fried may go down as one of the most jaw-dropping. He resigned from his crypto exchange, FTX, as it collapsed from a domino effect of a surge in customers trying to withdraw their funds, and the company filed for bankruptcy. The Wall Street Journal reported that Bankman-Fried may have illegally taken about $10 billion in FTX customers’ funds for his trading firm, Alameda Research, whose future is also in peril. And Bankman-Fried is now worth close to nothing.
The downfall of FTX isn’t a typical story of crypto’s volatility or investor risk-taking; it crumbled not due to bad luck, but due to what now appears to be unsustainable layers of deception. On the surface, FTX appeared to be thriving — in the past year, it made several high-profile acquisitions and bailed out other failing crypto companies. In reality, it was drowning in debt. At least $1 billion in customer funds is reportedly missing. The stunning contrast between image and reality has resulted in Bankman-Fried facing a reputational fall from grace swifter than any in recent memory. The Justice Department and SEC began investigating FTX immediately after its collapse, and his friends and admirers in crypto, philanthropic, and political circles have quickly begun distancing themselves from the man widely dubbed the king of crypto.