Just weeks ago, Sam Bankman-Fried was considered crypto’s version of John Pierpont Morgan, willing to throw around his massive fortune to save the industry.
The curly-haired 30-year-old known as SBF was everywhere, backing flailing projects including BlockFi, Voyager Digital and Celsius. From the Bahamas, he invested in Robinhood Markets Inc., raising speculation that he’d take over the trading app. And why not? Just last year he said that once his FTX was big enough, it could swallow CME Group Inc. or Goldman Sachs Group Inc.
And he looked poised to leverage his fortune — $26 billion at its peak — to shape the world, donating millions to Democrats and promising that one day he’d give it all away to political causes and charity.
Now, the future of all of it is in doubt.
In the span of days, it became clear that Bankman-Fried and FTX were in the midst of a liquidity crunch and needed a bailout of their own. Changpeng Zhao’s Binance swept in to take over, and, while exact terms weren’t disclosed, it’s likely that SBF’s $15.6 billion fortune will be annihilated at the hands of his billionaire rival.
That might come as a shock to investors including Softbank Vision Fund, Singapore wealth fund Temasek and Ontario Teachers’ Pension Plan, who sunk $400 million into the exchange at a $32 billion valuation in January. But it also put the broader crypto industry on notice: If SBF isn’t safe, who is?
Record Wipeout
Bankman-Fried’s 53% stake in FTX was worth about $6.2 billion before Tuesday’s takeover, according to the Bloomberg Billionaires Index, based on that fundraising round and the subsequent performance of publicly traded crypto companies. He revealed in May that he had acquired a 7.6% stake in Robinhood. Shares of the online brokerage fell 19% on Tuesday after Binance agreed to acquire FTX, and were down an additional 5% at 9:39 a.m. in New York.
FTX wasn’t Bankman-Fried’s most valuable asset, though. That was his crypto trading house, Alameda Research, which contributed $7.4 billion to his personal fortune.
The Bloomberg wealth index assumes existing FTX investors, including Bankman-Fried, will be completely wiped out by Binance’s bailout, and that the root of the exchange’s problems stemmed from Alameda. As a result, both FTX and Alameda are given a $1 value.
That leaves SBF’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.
Alameda was founded by Bankman-Fried, formerly a trader at Jane Street, and Gary Wang, an engineer who’d previously worked at Google. They found a niche: arbitraging pricing differences in cryptocurrencies in different countries, and soon expanded into a range of quantitative crypto trading strategies.
It seemed highly profitable. Bloomberg in September reported the firm made about $1 billion in 2021. But questions remained about how FTX and Alameda interacted with each other.
FTT Fear
Then Zhao, known as CZ, helped bring about the demise of his chief rival and onetime disciple.
Crypto news site CoinDesk reported on Friday that a token issued by FTX, FTT, made up about a quarter of Alameda’s $14.6 billion in assets. Another item, labeled “FTT collateral,” accounted for $2.16 billion.
Apparently in response to the revelations, Zhao tweeted that his exchange would be liquidating its holdings of FTT. The token’s value has since sunk by about 80%.
CZ now looks poised to add FTX to his own empire. He is already the richest person in crypto, with a fortune estimated at $16.4 billion. His net worth peaked at $97 billion in January, according to the Bloomberg wealth index.
Binance’s acquisition doesn’t involve FTX.US, a separate exchange also majority-owned by Bankman-Fried. FTX.US was valued at $8 billion in a January fundraising round.
It’s unclear exactly what the implosion of its international affiliate will have on the US-based exchange, but it shows “how fragile this world is,” said Paul Gulberg, a Bloomberg Intelligence analyst. It’s “very surprising, scary to some extent.”
--With assistance from Nur Dayana Mustak.
©2022 Bloomberg L.P.
