If you aren’t that knowledgeable about crypto and randomly bumped into Sam Bankman-Fried in the streets of Nassau, Bahamas, you probably would have dismissed him as another geeky coder going through the motions of digital nomadism. That would be a classic case of mistaken identity, and nothing could be further from the truth.
The 30-year-old millennial is the founder and CEO of FTX, an American cryptocurrency exchange, and Alameda Research, a quantitative crypto trading firm. He also recently acquired 7.6% of Robinhood. He ranked an impressive 60th position on the Forbes 400 this year, with a staggering net worth of $22.5 billion. This makes him the youngest billionaire on the list, a feat that had previously only been achieved by Mark Zuckerberg.
He started off early as a trader immediately after finishing his degree in Physics and Math at Stanford. In 2018, he saw a massive arbitrage opportunity for trading Bitcoin. He noticed that Bitcoin was selling for $10,000 in the United States, while going for a premium in Asia, at upwards of $11,000. He would buy Bitcoin worth $10 million and sell it in Hong Kong and Japan, pocketing the $1M dollar difference. At the height of his exploit, he says he made a million dollars daily, and he would move close to $25 M worth of crypto daily.
Fast forward to the 2022 crash in the crypto markets, and sentiment around SBF’s involvement in crypto has become one of the most polarizing topics in the industry. Allegations have been leveled against Alameda for causing distortion that eventually allowed them to profit from the crash. On-chain Twitter sleuths claim that Alameda was involved in the recent dumping of staked Ethereum on the Celsius Network, thus causing Ethereum to tank in value by over 60%, and pushing the defi lender into a liquidity crisis. This is what has led to the shutting down of withdrawals and swaps on Celsius since last week.
It is worth noting that similar accusations had been made against Alameda Research in November last year via a class action lawsuit. The claim was however thrown out on technical grounds.
However, SBF has come out to rubbish the allegations, stating that were he to involve himself in such an exploit, the entire ecosystem would be affected (him included). He has said that the recent crash has actually been courtesy of the hawkish sentiments from the Federal Reserve and that the markets would be forced to adjust accordingly.
SBF has now embarked on a bailout spree to mitigate the liquidity crunch that has affected many players in the crypto industry, and he says he expects heightened M&A activity as the bear market unravels. Some of his investments include:
A $250 M revolving credit facility to crypto lender BlockFi through FTX. (He owns approx 70% of the exchange)
A $500 M financing to Voyager Digital, another crypto lender through Alameda Research. (He owns 90% of the trading firm)
A deal to acquire Bitvo, Canada’s first regulated digital asset trading firm through FTX in Q3 of 2022, for an undisclosed amount.
A $120 credit line to Japanese exchange Liquid, after they were victims of a $100M hack last year. (FTX has since acquired the exchange to help them navigate Japan’s murky crypto regulation regime)
These bailouts have led to some people drawing comparisons with the bailouts made to the financial markets by JP Morgan in the wake of the 1907 crash.
However, not everyone is pleased with his actions. Most notably SEC Commissioner Hester Pierce (also known as Crypto Mom for her favorable stand on matters crypto) has castigated bailouts, saying that the downturn is needed in order to flush out grifters and weak companies from the space.
SBF has famously stated that he only wanted to get rich so that he could “give it all away to charity”. Currently, FTX donates 1% of its revenue to good causes. SBF has also been a noteworthy donor to political causes. He personally donated $5 M to Joe Biden’s presidential campaign in 2020, making him the second largest individual donor after Mark Bloomberg. He has also pledged a shocking $1 B to the Democratic Party should Donald Trump attempt to seek re-election.
What do you think of the blue-eyed billionaire? Is he crypto’s savior and lender of last resort? Or is he a wolf in sheep’s clothing?
Norman Gabula Commercial & Tech Lawyer | Crypto, Blockchain & Decentralized Finance and Consultant Sheria Online.
