Sam Bankman

Sam Bankman-Fried at the DealBook conference hosted by The New York Times, November 30, 2022 (GETTY IMAGES NORTH AMERICA/Michael M. Santiago)

Yesterday superstar of the cryptocurrency sector, today compared to Bernard Madoff, the author of the biggest financial scam in history: Sam Bankman-Fried fell from his pedestal after the bankruptcy of his FTX platform.

Changpeng Zhao, the boss of rival cryptocurrency platform Binance, called him a “psychopath”. He is a “compulsive liar”, according to Democratic MP Ritchie Torres, a “crook” for columnist Jim Cramer.

Last summer, however, the prestigious magazine Fortune was still wondering if the 30-year-old entrepreneur was the “next Warren Buffet”, legendary American billionaire compared to an oracle for his investment advice.

“SBF” had forged, in just a few years, a reputation as a successful boss and generous philanthropist. He had participated in popularizing virtual currencies among the general public, becoming a darling of the media and a privileged interlocutor of the political world and regulators.

Abundant hair, often dressed in a T-shirt and Bermuda shorts, he had indeed championed better regulation of the cryptocurrency sector.

But the brutal implosion in November of FTX, still valued at $32 billion at the start of the year, revealed a character with disconcerting managerial practices, an expensive lifestyle and erratic behavior.

“Never in my career have I seen such a complete failure of a company’s control mechanisms and such a flagrant absence of reliable financial information”, lambasted in a court document last month John Ray, who replaced Sam. Bankman-Fried to lead FTX after bankruptcy filing.

Mr. Ray, who oversaw several bankruptcy proceedings including that of the former energy giant Enron, described the confusing functioning of the company under SBF: according to him, expense reports were validated by emojis, and employees had dipped into the fund to buy residences in the Bahamas where FTX is based.

Sam Bankman-Fried is mainly accused of having improperly used the money deposited by FTX users to finance risky bets from Alameda Research, a hedge fund he also created. Several billion dollars contributed by FTX clients remain untraceable to this day.

In total, American justice has issued eight counts, including electronic fraud and money laundering, against Sam Bankman-Fried. Arrested earlier this week in the Bahamas, he faces a long prison sentence.

– “I screwed up” –

Mr. Bankman-Fried, who has spread in the media and on social networks in recent weeks despite heavy legal threats, denies any scam.

“I would like to start by declaring formally and under oath: I screwed up,” he nevertheless planned to declare to American deputies on Tuesday during a hearing, in which he did not participate because of his arrest.

His contrite air of the last few weeks offered a striking contrast to the confident posture he had displayed until then.

Originally from Palo Alto, California, Mr. Bankman-Fried worked for a Wall Street fund after studying at the Massachusetts Institute of Technology (MIT), then launched Alameda Research in 2017 and FTX in 2019.

On the strength of his flash success, he has forged prestigious partnerships with American football legend Tom Brady, Brazilian top model Gisèle Bundchen, and comedian Larry David, who appeared in an advertisement for FTX broadcast during the Super Bowl, the event most-watched sportsman in the United States.

The logo of FTX, photographed on November 13, 2022 in Washington (AFP / Stefani Reynolds)

The logo of FTX, photographed on November 13, 2022 in Washington (AFP / Stefani Reynolds)

Mr. Bankman-Fried had also posed as the white knight of a sometimes adrift sector, coming to the rescue of several companies in cryptocurrencies in difficulty.

This claimed vegan was also a figurehead of effective altruism, a philosophical doctrine encouraging the richest to redistribute their money for causes they consider essential.

He had also used his personal funds to contribute to electoral campaigns of Democratic and Republican candidates. Donations now suspected of having served him to curry favor with the political class.

Estimated for a time at more than 20 billion dollars, the fortune of Mr. Bankman-Fried has almost completely evaporated in recent weeks.

Sam Bankman-Fried, the dizzying fall of a cryptocurrency superstar