Founder of FTX Sam Bankman-FritoThe trial begins Tuesday. The former cryptocurrency superstar faces federal fraud charges, and a book detailing the rise and fall of the alleged fraudster will be published on the same day.
Best seller author michael lewis He had access to Bankman-Fried at all hours and met with him more than 100 times in two years. Lewis details how Bankman-Fried's empire fell apart in "Going Infinite," but leaves it up to readers to decide whether Bankman-Fried was a cryptocurrency scammer or a really smart guy incapable of running and managing a business.
The Rise of Crypto Superstar Sam Bankman-Fried and FTX
Bankman-Fried, once considered by some to be the JP Morgan of cryptocurrencies, worked as a Wall Street trader before moving to Berkeley at age 25 to start his own trading company, Alameda Research. Instead of stocks and bonds, he traded cryptocurrencies, a digital form of currency not tied to a centralized system. Bankman-Fried made a fortune and had the idea to open his own cryptocurrency exchange: FTX.
"It's owning the casino," Lewis said. "He started out as a gambler and realized that, you know, building a better casino was actually going to be more valuable."
Soon, approximately $15 billion a day in trades were being executed on FTX, and Bankman-Fried was worth more than $20 billion before he was 30 years old. Lewis says he didn't know anything about the cryptocurrency wunderkind when a friend called him asking him to meet with him. with Bankman-Fried.
"All I knew was that I was supposed to evaluate his character. And that 18 months earlier, he had nothing. Now he had $22.5 billion and was the richest person in the world under 30," Lewis told 60 Minutes.
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When they met, Lewis says he learned that Bankman-Fried didn't care much for symbols of wealth; he was committed to making as much money as possible so that he could give it away as efficiently as possible, all in the service of a social movement: effective altruism.
Bankman-Fried set out to confront what she saw as existential threats to humanity: AI run amok, the threat of a future pandemic, and something even more unusual: Donald Trump. According to Lewis, Bankman-Fried felt the former president was undermining democracy. Bankman-Fried, who generously donated to political campaignsconsidered paying Trump not to run for president in 2024. Lewis writes in "Going Infinite" that the Bankman-Fried team had even obtained a figure from someone inside the Trump operation: $5 billion.
"They were still having these conversations when FTX blew up," Lewis said. "So why didn't it happen? I didn't have $5 billion anymore."
The fall of Sam Bankman-Fried and FTX
By spring 2022, FTX had taken root in the Bahamas. Bankman-Fried moved the company not because of the beaches, but because of the friendly regulatory climate. The company had cleared land for a new corporate headquarters, but all was not well.
Lewis noted that Bankman-Fried avoided hiring "adults" at FTX and felt that anyone over 45 was useless, but if there was ever a corporate leader who needed an adult's input to manage 400 employees, it was Bankman. -Fried. The author explained that even Bankman-Fried's closest colleagues thought he was a horrible manager.
"His only leadership experience was running puzzle quests for math nerds after high school," Lewis said. "And deep down he thought that if they asked him, people shouldn't need to be directed. So he proceeded to act on it and basically didn't direct them."
There was no chief financial officer, no human resources department, and no compliance officer.
"It was Sam's entire world and there was no one there to say, 'No, don't do that,'" Lewis told 60 Minutes correspondent Jon Wertheim.
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To run his private trading company, Alameda Research, Bankman-Fried installed a former Wall Street trader, Caroline Ellison, who also became his girlfriend. But the couple separated and did not communicate in the months before FTX collapsed.
The breakout occurred precisely at the same time that cryptocurrency prices collapsed in the summer of 2022.
Although Bankman-Fried owned the FTX exchange, he also traded cryptocurrencies on FTX through Alameda Research.
"He was gambling in his own casino and that created conflicts of interest," Lewis said.
Then came a double whammy: a leak of Alameda Research's unflattering balance sheet in early November, and days later, Changpeng Zhao, head of a rival exchange, questioned FTX's viability on Twitter. The effect: a panic run on FTX.
"It falls apart because FTX depositors want their money back and it's not all there," Lewis explained.
In large part, the money wasn't there because investor funds intended for FTX ended up in Bankman-Fried's Alameda Research to the tune of more than $8 billion.
Bankman-Fried lost practically everything in a matter of days last November.
Lewis told 60 Minutes that he doesn't believe Bankman-Fried knowingly stole customer money, explaining that in the early days of FTX, the company couldn't get a bank account, so customer funds were They sent to Alameda Research, which could obtain a bank account. Those funds were never transferred to FTX.
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Lewis asked Bankman-Fried how he couldn't know that $8 billion of investors' money was in Alameda Research instead of FTX. Lewis told 60 Minutes that Bankman-Fried said, "'You have to understand that when he went in there, it was a rounding error. That it felt like we had infinite dollars in there and I wasn't even thinking about that." "
Juan J. Ray IIIwho took over to run FTX after it filed for bankruptcy in November, previously said the company collapsed due to "extremely inexperienced" leadership.
The arrest of Sam Bankman-Fried and the charges he faces
Lewis returned to the Bahamas to see Bankman-Fried as his crypto empire collapsed. One month after, Bankman-Fried was arrested and extradited to New York to face federal charges that he fraudulently used client deposits to finance billions of dollars in venture capital investments, real estate purchases and political donations.
Bankman-Fried was indicted and pleaded not guilty to seven counts, including wire fraud and conspiracy to commit wire fraud against lenders and customers, conspiracy to commit securities fraud, and conspiracy to commit money laundering.
Bankman-Fried was released on bail shortly after his arrest. He wore an ankle monitor and lived in his childhood home in Northern California with his parents, who were also caught up in legal proceedings involving FTX. Lewis would drive there to meet with Bankman-Fried so they could continue their conversations. The judge in the case later imposed a gag order and jailed Bankman-Fried in New York City for violating the terms of his release.
What's next for Sam Bankman-Fried?
Bankman-Fried's trial begins Tuesday.
"He really thinks he's innocent," Lewis said. "I can tell you his state of mind four or five months ago. He says, 'If they offered me to plead guilty and serve six months of house arrest, I would still say no.'"
Bankman-Fried faces a possible combined sentence of more than 100 years if convicted, but Lewis suspects Bankman-Fried's biggest fear if he has to go to prison is not having access to the Internet.
"That sounds crazy, but I think if I had the Internet, I could survive in prison forever," Lewis said. "Without having a constant flow of information to react to, I think he could go crazy. If you gave Sam Bankman-Fried the choice of living in a $39 million penthouse in the Bahamas with no Internet, or in Downtown Metropolitan Detention in Brooklyn with the Internet, I have no doubt I would go to jail."
Reported by Jon Wertheim, Draggan Mihailovich and Emily Cameron
