Sam Bankman-Fried

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Sam Bankman-Fried in Nassau, Bahamas, April 26, 2022.

Erika P. Rodriguez—Chicago Tribune/TNS/Alamy

Sam Bankman-Friedwas the founder and former chief executive officer (2019–22) of FTX Trading Ltd., a cryptocurrency exchange. The exchange became the second largest of its kind, making Bankman-Fried a powerful figure within the market of digital assets and in discussions in the United States Congress regarding the industry’s regulation. It was closely tied to Alameda Research LLC, a quantitative trading firm Bankman-Fried had cofounded in 2017. The exchange collapsed suddenly in November 2022 when revelations of broad mismanagement at both FTX and Alameda Research led to a run on customer deposits. The following year Bankman-Fried was convicted of wire fraud, conspiracy, and money laundering, and he was later sentenced to 25 years in prison.

Bankman-Fried was born in 1992 to Joseph Bankman and Barbara Fried, scholars of tax law. He attended the Massachusetts Institute of Technology (MIT), where he received a bachelor’s degree in physics in 2014. While studying at MIT, he began engaging with “effective altruism,” a philosophical movement inspired in part by the utilitarian school of Peter Singer. The movement’s empirical approach to philanthropy justifies the accumulation of enormous sums of wealth, so long as that wealth is then given to good causes that could improve or save others’ lives. When Bankman-Fried had lunch with one of the movement’s foundational thinkers—an Oxford doctoral student in his mid-20s—he was convinced to leverage his mathematical aptitude to meet philanthropic ends. Shortly after graduating, he joined Jane Street Capital, LLC, a quantitative trading firm, and traded equities and exchange-traded funds (ETFs).

In 2017 Bankman-Fried left Jane Street and, while working briefly at the Centre for Effective Altruism, used arbitrage strategies he had learned as a trader to push the limits of his earnings. He began trading Bitcoin, a cryptocurrency with high volatility—and therefore high potential payoff—partly due to the limited regulation of digital assets. Later that year he cofounded Alameda Research LLC, a quantitative trading firm with an arbitrage model focused on digital assets. Within months the company at times would make as much as a million dollars a day in profit.

In 2019 he set up FTX Trading Ltd., a cryptocurrency derivatives platform, in an effort to attract continued investment. The exchange offered discounts to customers who conducted trades using its native token, called FTX Token (FTT). Alameda Research became one of the largest holders of FTT before the token was floated on the market, allowing the firm to function as the token’s market maker and maintain the stability of its price. Bankman-Fried believed the fusion of exchange, broker, and market maker would enable maximum efficiency, a single aggregate risk view, and real-time clearing and settlement.

By the turn of the decade, Bankman-Fried had established himself as a donor to be reckoned with. Already a billionaire in 2020, he began donating large sums to U.S. political campaigns, including millions of dollars to Joe Biden’s presidential campaign that year. In the 2022 midterm election cycle, Bankman-Fried was the second largest individual donor to Democratic campaigns. He also gave to a large variety of causes, favoring projects with potential future payouts for humanity (such as pandemic preparedness) over those that would alleviate immediate suffering (such as providing mosquito nets to prevent malaria). While Bankman-Fried cultivated the public image of an everyman, wearing nondescript clothing and espousing his philanthropic values when marketing FTX, he lived a lavish lifestyle in the Bahamas that garnered less attention.

He caught the ear of several members of the U.S. Congress, where he twice formally testified on the regulation of digital currencies, first in December 2021 and again in February 2022. In his testimonies he advised Congress to build a regulatory framework around existing policy, with the Commodity Futures Trading Commission (CFTC) as the primary regulator, and in a flexible manner that could respond to the evolving nature of the digital assets market.

Meanwhile, as the cryptocurrency market crashed in mid-2022, FTX stood out in the industry as resilient. Not only did it remain profitable, but Bankman-Fried bailed out several firms in the industry that had failed to navigate the crash. Alameda Research, on the other hand, was in trouble. Lenders, shaken by what had happened to less successful firms, recalled funds that Alameda Research had used in venture investments. When Alameda Research sought help from FTX to meet its lenders’ demands, FTX silently dipped deep into its customer deposits in order to loan Alameda Research the money that it needed.

Months later the relationship between Alameda Research and FTX was brought under scrutiny. On November 2, 2022, a website specializing in news coverage of the digital assets market reported details from a leaked Alameda Research balance sheet. Those details indicated that the firm was propped up by its FTT holdings, indicating a much weaker foundation for FTT than previously known and shaking consumer confidence in the token. Days later the value of FTT began collapsing after the CEO of Binance, a competing exchange, announced that it would sell off its holdings of the token. The announcement initiated a run on the asset, but FTX did not have the funds to pay off everyone who wanted to cash in their tokens. On November 11 it was reported that at least $1 billion in customer funds had gone missing.

The sudden collapse of FTX, despite its reputation as a stable and reliable exchange, highlighted the lack of transparency and accountability in the digital assets market. Not only was the handling of FTX’s finances opaque, but it was also remarkably lax. In December during a congressional hearing about the collapse, it was revealed that employees had handled invoices via instant messaging and that bookkeeping had been conducted using basic accounting software designed for small-business use.

In the aftermath of the collapse, Bankman-Fried made a bizarre media blitz, offering the public a mea culpa, apparently without grasping the gravity of his wrongdoing. He confessed that he had gotten “a little cocky” and “wasn’t spending any time or effort trying to manage risk on FTX” but insisted that he “didn’t knowingly commingle funds” and “didn’t ever try to commit fraud.” He acknowledged “messy accounting” and “huge management failures,” but his explanation did little to assuage the losses suffered by a massive number of customers. For all his intent on being an effective altruist, it was as if he were unaware of the age-old aphorism “The road to hell is paved with good intentions.” On December 12, 2022, he was taken into custody at his home in the Bahamas; the following day, he was indicted on eight criminal charges by the U.S. Department of Justice and two separate civil charges by the CFTC and the Securities and Exchange Commission (SEC).

Bankman-Fried went on trial in October 2023, charged with seven counts of fraud, conspiracy, and money laundering. The following month he was convicted on all charges. In March 2024 he was sentenced to 25 years in prison and ordered to surrender more than $11 billion in assets.