Sam Bankman-Fried, 30, is by far the most hated man alive today.
He has been dubbed the Bernie Madoff of crypto by social media.
This portrayal stems from the unexpected and unprecedented bankruptcy of his crypto empire, which will ruin many retail investors.
FTX was one of the biggest players in the crypto universe until its collapse on November 8, when Bankman Fried announced that he had reached an agreement to sell his empire, which also includes Alameda Research, a cryptocurrency trading platform, to his rival ChangPeng Zhao and his Binance group.
But the next day, Zhao changed his mind, abandoning FTX and Bankman-Fried to their fate. Overnight, Bankman-Fried went from being the savior of the crypto industry to a crook.
"They lied. FTX lied. I think Sam lied to his employees, his users, his shareholders, regulators all around the world and all the users," Zhao said during a Twitter event on November 14. "So yes, he should take most of the blame."
In February, FTX was worth $32 billion while its former CEO was one of the richest men in the world, with a fortune valued at $15.6 billion. It is now wiped out.
The insolvency of FTX, which filed for Chapter 11 bankruptcy on November 11, was the result of a liquidity shortfall when clients attempted to withdraw funds from the platform a few days ago. The liquidity shortfall appears to have been the result of its founder reportedly transferring $10 billion of customer funds from FTX to his cryptocurrency trading platform Alameda Research, according toReuters, citing two sources that "held senior FTX positions until this week”.
'I'm Sorry'
FTX faces a shortfall of $1.7 billion, one source told Reuters, while the other source said that between $1 billion and $2 billion were missing. Bankman-Fried, who resigned as CEO on November 12, was once hailed as the savior of the sector during the liquidity crisis of last summer.
FTX's financials also showed that there was a "back door" in the books, created with "bespoke software," according to the news outlet. It was described as a way that Bankman-Fried could alter the firm's financial records without raising any alerts.
But Bankman-Fried denied the existence of a "back door."
The former crypto king issued an apology and posted erratic and disturbing messages on Twitter.
Regulators in the United States have opened investigations, while authorities in the Bahamas, where he lives and where FTX is headquartered, have opened a criminal investigation.
But for many cryptocurrency fans and critics, that's not enough. They want justice, and fast. They are asking that Bankman-Fried, who is nicknamed SBF in the crypto sphere, be thrown in jail as they believe he committed fraud or a Ponzi scheme.
Bernie Madoff of Crypto?
They thus stormed Twitter where SBF is still active. Every tweet the disgraced former FTX CEO posts gets countless comments from users who see him as the Bernie Madoff of crypto.
"In 2009, Bernie Madoff committed the biggest investment fraud in history. In 2022, Sam Bankman-Fried committed the biggest crypto fraud in history," wrote a Twitter user.
"Is Sam Bankman - Fried his generation’s Bernie Madoff? I hope the little punk rots in jail," said another Twitter user.
"What Sam Bankman-Fried did is absolutely illegal, not just ignorance," said one Twitter user. "He purposely lied and stole your money, and made sure that he had a built-in backdoor for the moment he was finally exposed so that he can disappear with everything. Send him to jail."
"Shame about Sam Bankman-Fried if true about allegedly Co-Mingling Funds! I think Bad Executives deny that Funds they use are not theirs. Funds are the Property of Shareholders. Abuse of Shareholder Funds is punishable up to jail time. 🟧 👮 More prosecution in future," added another Twitter user.
"The DOJ charged me with 186 years in jail because my users (not me) uploaded movies to my website, against our terms of service and despite of us having a perfect takedown record for all piracy links that were ever reported to us. How much jail time is Sam Bankman-Fried facing?" asked Kim Dotcom, who is accused of netting millions from his Megaupload file-sharing service.
"There is a possibility you are in prison and wont have chance to tweet more tweets," another Twitter user said.
"You took a gamble trying to save your company and lost. That’s what happened. You broke the rules, you lied and you stole peoples money. Now you need to face the music and pay back your debt to society. Take the L and do what’s right," lambasted another user.
"Where is my money?" another user simply asked.
What Was FTX Doing?
The details of potential investigations, both criminal and civil, formed part of a detailed filing with the Bankruptcy Court in Delaware. The Court will oversee the petition of FTX and more than 100 associated companies that was filed late Monday.
"FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday," said the filing with the Bankruptcy Court in Delaware. "Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction."
Sullivan & Cromwell, one of the firms expected to lead the legal proceedings, suggested "there could be more than one million creditors in these Chapter 11 Cases" and urged the court to compile a "consolidated list of their top 50 creditors."
As a crypto exchange, FTX executed orders for their clients, taking their cash and buying cryptocurrencies on their behalf. FTX acted as a custodian, holding the clients’ crypto currencies.
FTX then used its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to generate cash through borrowing or market making. The cash FTX borrowed was used to bail out other crypto institutions in the summer of 2022.
At the same time, FTX was using the cryptocurrency it was issuing, FTT, as collateral on its balance sheet. This represented a significant exposure, due to the concentration risk and the volatility of FTT.
