Cryptocurrencies: the vertiginous fall of Sam Bankman-Fried, ex-boss of FTX

If the rise of the boss of the huge FTX cryptocurrency exchange company was dizzying, the fall is just as dizzying today. In 24 hours, Sam Bankman-Fried lost 94% of his fortune, and had to resign as CEO of FTX after declaring the group bankrupt and plunging his clients into the uncertainty of ever seeing their money again. At just thirty years old, this American had become the prince of the cryptocurrency industry, and incidentally a multi-billionaire. Some compared him to Warren Buffet, others to John Pierpont Morgan, founder of one of the most powerful banks in the world.

However, he had nothing of the cliché of the golden-boys of the financial markets, and stood far from luxury cars and yachts. After studying physics and mathematics at the prestigious Massachusetts Institute of Technology (MIT), Sam Bankman-Fried had kept, even after his first billions, the look of the disheveled geek, appearing in a T-shirt and shorts with American deputies . "He swears by his vegan diet, shares an apartment with his roommates", said the Nikkei Asia newspaper in June 2021, also describing him as "the richest person in the world under thirty". A strong advocate of "effective altruism" (a philosophy that encourages its followers to earn as much as they can, then give as much as possible to minimize suffering in the world), he had promised to one day dedicate his fortune to charities.

It was at 28 that he launched his first cryptocurrency trading company, "Alameda Research". From Hong Kong in 2019, he then set up FTX, a buying and trading platform, before moving it to the Bahamas for his "comprehensive cryptocurrency licensing regime". An offshore exchange system (based in a state that has very favorable tax rules for non-residents regarding silver transactions), FTX allows investors to make risky transactions in crypto, not allowed in the United States. The success was immediate. In three years, the group has become a juggernaut in the crypto industry, and "SBF" - his nickname - the boss of a company estimated, last January, at 32 billion dollars.

Sam Bankman-Fried has a dream: to modernize the finance industry and democratize cryptocurrency trading by making it accessible to everyone. To achieve his goal, he spent millions of dollars over a few years to see the FTX name on Superbowl ads; displays its logo on Major League Baseball umpires. He even recruited American football superstar Tom Brady as an ambassador - who now could lose the $600 million he allegedly entrusted to FTX.

The thirty-year-old does not hesitate to put himself forward. Nor to get involved in the political world in order to defend more flexible regulations concerning the crypto industry. He is the face of his brand on Twitter - where he speaks a lot - but also on television and in the podcasts in which he participates, such as that of Bloomberg where he advises listeners on the best way to earn money. through cryptocurrencies.

Another lobbying strategy: campaign donations. Before becoming the Democrats' second-biggest midterm patron, he paid Joe Biden a check for $5 million during his 2020 presidential campaign. action plans" that promote political figures favorable to the development of cryptocurrencies. Last March, he appeared in Philadelphia alongside the Democratic chair of the House of Representatives Financial Services Committee, Maxine Waters, noted the Washington Post in an article. A few weeks later, he hosted a meeting on Capitol Hill to present his crypto regulatory agenda to half a dozen Democratic Senate aides.

But on November 11, after a week of turmoil, everything collapsed around the young prodigy. Within a day, he lost almost his entire fortune, was forced to declare FTX bankruptcy after he tried to sell his firm to his main competitor, fellow crypto tycoon Chengpen Zhao . The boss of Binance Coin refused the proposal in the face of the accusations of embezzlement of money which weigh on "SBF".

According to the Wall Street Journal, FTX would have used several billion dollars belonging to the customers of its platform (which would have held up to 16 billion on behalf of its customers), in order to lend nearly 10 billion to its investment firm Alameda Research. The group is now under investigation by the Securities Exchange Commission and the Department of Justice in New York, according to the New York Times, which cites sources familiar with the matter.

For its part, FTX and its new CEO, John Ray, said it was investigating "unauthorized transactions" and "doing everything possible to secure all assets, wherever located". In a lengthy Twitter thread posted Nov. 10, Sam Bankman-Fried made a confused apology, without acknowledging a conflict of interest. He promised to "do everything to raise funds", and that "every penny of this (...) will go directly to the users".

More generally, the cryptocurrency industry, known to be particularly volatile, has experienced major upheavals in recent months. Bitcoin's value plummeted from around $68,000 to $17,000 in a year after a chain reaction that sent several cryptocurrency lenders and funds plunging. The market has lost two-thirds of its market value, or about $2 trillion. The fall of FTX should be a new blow for this young industry, which is struggling to stabilize.