Sam Bankman-Fried, considered the J.P. Morgan of the crypto industry, tried to save the cryptocurrency industry by throwing around his vast fortune.
Known popularly as SBF, the 30-year-old curly-haired American entrepreneur and CEO of FTX, a cryptocurrency exchange, was backing everything, including Voyager digital, BlockFi, and Celsius. He invested in Robinhood Inc., giving rise to speculation he would take over the trading app. Everyone believed him a year ago when he said his FTX was so big he could take over Goldman Sachs inc or CME Group Inc.
With his $26 billion net worth during peak times, SBF tried leveraging his fortune by promising to donate all his wealth to charity and political causes, including millions to the Democrats. Everything appears to be in doubt now, as, in a few days, only SBF and FTX were looking for a bailout after a liquidity crunch.
Binance, led by CEO Changpeng Zhao (CZ), came in to acquire its rivals. The deal’s exact terms are unknown, but SBF’s $15.6 billion wealth will go into the hands of CZ, his billionaire rival.
The development is expected to cause shock to investors, including Temasek, the Singapore wealth fund, Softbank Vision Fund, and Ontario’s Teachers’ pension plan. They invested $400 in January in FTX at a valuation of $32 billion. The question now arises whether investing in the cryptocurrency industry is safe because if SBF is not safe, who is?
Unprecedented Wipeout
According to Bloomberg Billionaires Index, SBF had a stake of 53% in FTX, valued at about $ 6.2 billion before the takeover. The valuation was based on various fundraising rounds and performance in the crypto trading market.
SBF’s most asset was not his stake in FTX. His crypto trading firm Alameda Research contributed $7.4 billion to his net worth.
According to Bloomberg wealth index estimates, the investors in FTX, including SBF, will be wiped out completely after the Binance takeover. The root cause of the FTX problem arose from Alameda, resulting in both FTX and Alameda being valued at $ 1. This will leave SBF’s net worth valued at $1 billion, down from $ 15.6 billion. The 94% wipeout is the biggest collapse in a single day for any billionaire tracked by Bloomberg.
Bankman-Fried, who was a trader before with Jane Street, earlier founded Alameda Research along with Gary wang, a former Google engineer. Their niche was arbitrage in cryptocurrency in different currencies.
In September, Bloomberg reported a profit of $1 billion made by Alameda in 2021. The questions, however, remained about how Alameda and FTX interacted among themselves.
Ftt Fear
CoinDesk reported how FTX issued a token FTT that accounted for Alameda’s $14.6 billion in assets, and another token known as “FTT collateral “accounted for $2 .16 billion. Zhao has tweeted that Binance would liquidate the FTT holdings, which has since sunk the tokens value by 80%.
