From the ‘Forbes’ list to the abyss: The end of the line for three cryptocurrency visionaries

December 2021. Bitcoin just hit an all-time high, surpassing $69,000. The specialized portal Coindesk awards the title of most influential man in the crypto world to Sam Bankman-Frito (SBF), the Californian who leads the FTX trading platform. Also on the list are Do Kwon, a South Korean citizen, founder of the digital currency TerraLuna, and Changpeng Zhao (CZ), the Chinese-Canadian head of binanceFTX's biggest competitor.

The three men caught the attention of Forbes magazine. The publication placed Kwon among Asia's top 30 personalities under 30, with SBF and CZ included in the ranking of the richest people on the planet.

For SBF, these were the glory days. The American ran his business from a mansion in the Bahamas with a group of friends. Some media compared him to the famous investor Warren Buffett. And his wealth wasn't bad either: with $22.5 billion to his name, he was only behind Mark Zuckerberg when it came to amassing such a fortune before the age of 30. The Canadian Czech Republic was not far behind, with Forbes estimating its value at around $15 billion.

During these good times, the three young people tweeted vigorously, promising a better life for all those willing to put their savings in emerging countries. cryptocurrency universe, which were (supposedly) intended to take away the monopoly on money from central banks. "The lunar cycle has only just begun," Kwon wrote. After leaving Stanford University, where he studied computer science (the same degree he completed CZ), he worked for Apple and Microsoft. A fan of video games, on Sundays he still shares with his millions of followers on X (formerly Twitter) photographs in which he appears playing Star boata futuristic adventure that pits three races against each other for control of the galaxy.

In 2021, TerraLuna's valuations were generating mountains of money for those who bought the cryptocurrency, fueling Kwon's reputation as a visionary genius. The world seemed a kind place for young innovators. SBF, the son of two prestigious law professors and a Physics graduate from MIT, also escaped his lucrative job by playing Star boat and League of Legends.

The crypto aristocracy was presented to the world with a certain nerdy aesthetic, which fit with the new digital ecosystem of Silicon Valley and the addiction to screens. In addition to amassing money, they sought to promote an unprecedented technological leap. “The most exciting thing about cryptocurrencies is that they will facilitate the Great Migration of human activity from the physical world to the Internet,” Kwon said.

Some of the richest and most eccentric men from successful companies, such as Elon Musk or Jack Dorsey, gave their blessing to the crypto brothers and at the same time promoted them on social networks. And, as is often inevitable in any business involving quick profits, Wall Street quickly entered the picture. The American platform Coinbase began trading and investing in cryptocurrencies, allowing the world to become accessible to stock traders.

But then the rise of cryptocurrencies experienced a backlash. An army of detractors was joined by numerous Nobel laureates, central bankers and economists. Amid growing regulatory hurdles, intense lobbying began. CZ was seen with ministers and heads of state from around the world on a whirlwind tour. He was photographed with President Emmanuel Macron, after promising to place his company's European headquarters in Paris (in exchange for friendly regulations). And of course, he took a selfie with El Salvador President Nayib Bukele, a cryptocurrency enthusiast who wants turn his Central American nation into the world's cryptocurrency power.

Meanwhile, SBF unceremoniously took money out of its accounts to hire sports stars, sponsor NBA arenas, and advertise at the super-expensive Super Bowl halftime. He also sought to expand his political influence by pouring cash into Joe Biden's 2020 presidential campaign, becoming the second-largest donor to the Democratic Party, with a total contribution of $5.2 million (former New York Mayor Michael Bloomberg, contributed $56 million). Winning over politicians was a priority for the crypto elite.

But then something went terribly wrong.

In December 2023, Bitcoin is worth a third less than in its heyday… although it appears to be recovering from a dark period of price declines and bad news. We are out of the so-called "crypto winter." As the industry tries to adjust its course, none of the sector's former leaders are on the front lines to see it. Do Kwon has been in police custody in Montenegro for the past eight months, after being detained at that country's airport in a desperate attempt to prolong his escape. Authorities have just authorized his extradition, although no one knows exactly where he will be sent. Both South Korea and the United States want charges brought against him: he is accused of having defrauded investors of $40 billion after leaving TerraLuna in ruins. In May 2022, his net worth reached zero in just a few days.

Sam Bankman-Fried, upon arrival at federal court in New York City, March 30, 2023. Peter Foley (EFE)

FTX went bankrupt a year ago. Sam Bankman-Fried was subsequently arrested in the Bahamas and extradited to the United States. He faces a maximum sentence of 110 years in prison for being responsible for a $10 billion hole. The testimonies given by members of his team - and the auditor who took charge of the company's restructuring, to try to recover as much money as possible, indicate that the platform did not maintain adequate accounting and records, nor adequate security controls. Software was allegedly used to conceal the misuse of clients' funds, which were used to purchase homes and luxury items.

It all came down, in the auditor's words, to “a very small group of inexperienced people.” An ocean liner that was too big for them ended up in their hands and sank. The users have not recovered their money, while SBF awaits the outcome of its trial at the Brooklyn Metropolitan Detention Center in New York. He shares space with other high-profile detainees, such as the former president of Honduras, Juan Orlando Hernandez, accused of cocaine trafficking. There, in prison, the currency is different. According The Wall Street JournalBankman-Fried paid for a haircut with cans of mackerel.

Changpeng Zhao, former CEO of Binance, the world's largest cryptocurrency exchange, leaves a Seattle courtroom on Nov. 21, 2023.
Changpeng Zhao, former CEO of Binance, the world's largest cryptocurrency exchange, leaves a Seattle courtroom on Nov. 21, 2023.

David Ryder (Getty Images)

Meanwhile, Changpeng Zhao remains free. Last month, the US Department of Justice forced him to leave his position as CEO of Binance. In a settlement with US authorities, he agreed to pay a $50 million fine after Pleading guilty to violating money laundering laws.. In the US, Binance will also have to make a lot of money and pay around $4 billion, although the sanction does not endanger the survival of the company, which is the absolute world leader in cryptographic transactions. He continues to collect lucrative commissions in return.

Zhao, a leader in the crypto community, with 8.7 million followers on X, will even be able to maintain share control of the company. His punishment, however, is to lose the management power that led him to continually rub shoulders with political and business leaders. He admits that he is surprised by this abrupt change. “I haven't had a single day of real break (without a phone) for the last six and a half years. “I’m enjoying all the free time I suddenly have now,” he tweeted, shortly after learning of his forced departure.

Former rivals Do Kwon and Sam Bankman-Fried – stripped of their fortunes and businesses and hated by the millions of customers they left without savings – probably wish their biggest concern was something as trivial as figuring out how to spend their free time.

Register for our weekly newsletter for more news coverage in English from EL PAÍS USA Edition

Leave a Comment


No comments yet. Why don’t you start the discussion?

Leave a Reply

Your email address will not be published. Required fields are marked *