Sam Bankman-Fried fidgeted nervously as he was asked about his potential criminal exposure at The New York Times DealBook Summit in late November.
“There’s a time and a place for me to think about myself and my own future,” Mr Bankman-Fried said on a videolink from his base in the Bahamas as his distinctive mop of curly hair bobbed up and down. “I don’t think this is it.”
Less than two weeks later, the founder and former CEO of fallen crypto exchange firm FTX was arrested and charged by US prosecutors, on 12 December, with defrauding customers and investors of billions of dollars while enriching himself and a small group of top executives.
Bankman-Fried’s journey from an “effective altruist” who amassed extraordinary wealth while in his 20s to a precipitous fall that appears likely to end in a lengthy prison term will be pored over by books, television series and numerous criminal and regulatory investigations for years to come.
At its core, his story is “not sophisticated at all”, FTX’s new CEO John Ray III told lawmakers on Tuesday: “This is just plain, old fashion embezzlement, taking money from others and using it for your own purposes.”
The Department of Justice alleged in a 13-page criminal indictment unsealed on Tuesday that Bankman-Fried had been engaged in fraud since at least 2019.
According to a separate civil charge by the US Securities and Exchange Commission, Bankman-Fried “built a house of cards on a foundation of deception”.
The years-long scheme involved defrauding investors of FTX and illegally using their funds to gamble on risky venture investments through his hedge fund company Alameda Research, while funding a en eyewateringly lavish lifestyle in the Bahamas.
He also faces criminal charges of making illegal campaign donations after giving lawmakers from both parties an estimated $40m in the last electoral cycle.
On paper, Bankman-Fried’s net wealth was estimated at around $26bn at its peak in 2021. On 30 November, he told DealBook’s Andrew Ross Sorkin that he had around $100,000 left.
Who is Sam Bankman-Fried?
Bankman-Fried, 30, was born in 1992 on the campus hospital at Stanford University, California, where his parents Joseph Bankman and Barbara Fried were law professors at Stanford Law School.
In 2014, he graduated from the Massachusetts Institute of Technology with a physics degree before taking a job at Wall Street trading firm Jane Street Capital.
He became an adherent to “effective altruism”, which advocates wealthy westerners donate significant portions of their money to charity.
Prosecutors and lawmakers allege he used the effective altruist movement as a cloak to conceal his true intentions of amassing immense personal wealth, by funneling investor funds into an estimated $300m in high-end real estate in the Bahamas.
Bankman-Fried began attracting attention in the crypto world after founding trading firm Alameda Research in 2017 at the age of 25.
Exploiting an unusual quirk in short-term crypto values, Bankman-Fried learned he could buy Bitcoin in the US and sell it for about 10 per cent higher in Japan in a practice known as arbitrage.
Alameda quickly became a major player in crypto and boasted of having more than $90m in digital assets while trading between $300m to $1bn daily.
Bankman-Fried relocated from California to Hong Kong in 2018 to take advantage of the looser regulatory environment.
There, he began to cultivate the image of a millennial digital nomad and vegan workaholic. He told reporters that he slept on a bean bag in the office for a few hours a night and eschewed the finer things in life, and was always pictured in his trademark shorts and t-shirt attire.
He founded FTX in 2019 and quickly grew it into the second largest crypto exchange in the world.
In 2021, he relocated to the Bahamas where he would become the toast of the cryto world, feted in fawning profiles as a “white knight” in the wild west of crypto who funded charitable endeavors to the tune of more than hundreds of millions per year.
Bankman-Fried’s rivalry with fellow billionaire Changpeng Zhao, the Chinese-Canadian head of crypto exchange giant Binance, was a central theme to his story.
Michael Lewis, the acclaimed author of The Big Short who is now writing a book on Bankman-Fried after being embedded with him for months in the Bahamas, likened the pair to the “Luke Skywalker and Darth Vader of crypto”.
In the Bahamas, Bankman-Fried welcomed a procession of world leaders and celebrities who wanted in on this rising star.
In April, he hosted the Crypto Bahamas conference, where he led an onstage panel featuring Bill Clinton and Tony Blair, noted a profile in The New York Times.
“Everywhere he went, crypto entrepreneurs offered handshakes and fist bumps, patting him on the back as they pitched projects or presented him with branded swag,” The New York Times wrote.
Despite his extraordinary wealth, Bankman-Fried claimed to lead a frugal lifestyle and donated heavily to philanthropic cause. He even pledged to donate his entire fortune to charity, focusing on longtermism and pandemic prevention.
The FTX Foundation and FTX Future Fund — Bankman-Fried’s philanthropic projects — gave away hundreds of millions of dollars in recent years to fund community groups such as the Grand Bahama Down Syndrome Society, to India’s Rajalakshmi Children Foundation, and others.
He also invested heavily in media companies, including Vox’s Future Perfect programme, and Semafor, a startup founded by former media correspondent for The New York Times Ben Smith.
At the same time, he was buying up luxury real estate investments in the Bahamas, prosecutors say.
A review of property records by Reuters found that Bankman-Fried and FTX had bought up $121m worth of property in the Bahamas over the past two years.
The implosion
As crypto prices plummeted in 2022, and several crypto exchanges faced bankruptcy, Bankman-Fried offered to step in and purchase BlockFi.
This was allegedly done to mask FTX’s own liquidity troubles, prosecutors would later claim.
A report in early November in Coindesk revealed that FTX and Alameda Research had “co-mingled” funds, and that Alameda’s value was built on a “foundation largely made up of a coin that a sister company invented”.
Binance’s Changpeng Zhao briefly offered a lifeline to buy out FTX, only to pull out after accusing Bankman-Fried of mishandling customers funds.
As investors desperately tried to pull their funds from FTX, Bankman-Fried’s net worth plummeted from $16bn to less than $980m in one day on 8 November, according to a Bloomberg wealth index.
FTX’s US operation filed for bankruptcy four days later in Delaware.
The bankruptcy courts appointed John Ray III — a veteran corporate lawyer — as CEO to oversee efforts to claw back the estimated $7bn in missing investments.
After FTX’s sudden implosion, lurid allegations began to emerge about goings on at Bankman-Fried’s $30m Bahamas penthouse where the company’s top executives lived and worked.
Rumours spread online that the team’s punishing work habits were fuelled by the prescription stimulant Adderall and that several senior employees were in a polyamorous relationship.
In an apparent attempt to dispel the claims, FTX’s in-house coach, a psychiatrist named George Lerner, approached the New York Times to deny that sex and drug use was anything out of the ordinary.
“The higher-ups, they mostly played chess and board games. There was no partying. They were undersexed, if anything,” Dr Lerner said. Some executives were prescribed medicine to treat ADHD, but that was typical in the tech industry, he added.
Bankman-Fried has acknowledged that he was romantically involved with Caroline Ellison, chief executive of his trading firm, Alameda Research.
Questions are also being raised about whether Ms Ellison may be cooperating with the Justice Department investigation.
‘This dumb game we woke westerners play’
With US prosecutors and regulators circling, SBF continued to protest his innocence in interviews and lengthy threads on Twitter, often against the advice of his lawyers.
In a particularly revealing interview with Vox journalist Kelsey Piper, that Bankman-Fried later claimed had been off the record, he admitted his effective altruism claims had been a front.
“You were really good at talking about ethics, for someone who kind of saw it all as a game with winners and losers,” Ms Piper asked.
“Ya... Hehe... I had to be,” Bankman-Fried replied. “I feel bad for those who get f***ed by it… by this dumb game we woke westerners play where we all say the right shiboleths and so everyone likes us.”
Bankman-Fried continued to deny any wrongdoing in interviews right up until his arrest on Monday.
Just hours before Bahamian authorities swooped, he was interviewed on Twitter Spaces by Unusual Whales, an options platform, while playing video games.
Bankman-Fried had been due to testify on Capitol Hill before lawmakers on the Financial Services House Committee.
The committee chair Maxine Waters said in her opening remarks that it was regrettable that “the timing of his arrest denies the public” the right to answers.
His parents have now been caught up in the fallout from FTX. Both have reportedly been relieved of teaching duties at Stanford in 2023, according to SFGate.
John Ray, testifying before Congress on Tuesday, said financial transactions involving his entire family would be examined.
FTX Brand ambassadors, who were once so eager to be pictured with Bankman-Fried-Fried, haven’t escaped unscathed either.
Out-of-pocket investors launched a billion-dollar class action lawsuit claiming the celebrity backers including NFL star Tom Brady, his former wife Gisele Bundchen, Curb Your Enthusiasm actor Larry David and the entire Golden State Warriors NBA team were liable for promoting the failed firm.
In that 30 November interview with the NYT’s Dealbook Summit, Bankman-Fried was asked whether he had been truthful with investors and customers.
“I was as truthful as I’m knowledgeable to be,” he responded.
