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Sam Bankman-Fried's Surprising Transformation From White Knight To Defeat

Sam Bankman-Fried’s Surprising Transformation From White Knight To Defeat

November 11 (Reuters) – Sam Bankman-Fried earned a reputation as a savior of the cryptocurrency industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and led until Friday, needed a lifeline, nothing was forthcoming.

Until this week, the 30-year-old American was seen as a digital asset darling who has amassed billions in personal wealth by running one of the world’s largest crypto platforms. But with traders rushing to withdraw funds from FTX, Bankman-Fried was in denial and told investors he was convinced the business would be bailed out, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. I apologize repeatedly.

“No one said there was anything wrong with the SBF,” said Marius Siobotario, co-founder of Hubble Protocol, a decentralized lending platform. He said the company’s collapse surprised the markets because Bankman-Fried was seen as a slick deal-breaker.

Bankman-Fried, better known in financial circles by his initials, SBF, has become an outstanding and unconventional figure in the industry. He wore his signature wild hair, shirts and shorts to his appearances with statesmen such as former US President Bill Clinton and former British Prime Minister Tony Blair, as well as model Gisele Bundchen. Bankman-Fried has also quickly become one of the largest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.

The cryptocurrency scientist began his career at Jane Street Capital, a choice he said was influenced by his desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.

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He amassed an estimated fortune of $26.5 billion by Forbes a year ago, by taking advantage of bitcoin price differentials in Asia and the United States. Bankman-Fried finally started cryptocurrency trading company Alameda Research in 2017 and founded FTX a year later. In January, it was valued at $32 billion.

The FTX crash sent bitcoin to a two-year low this week amid fears that the company’s problems will spread to other crypto companies. Staff were shocked by his breakdown, with some sending notes of apology to customers to express their shock at what happened, according to a person familiar with the matter.

FTX named John J. Ray III, a restructuring expert, as CEO on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed into scandal and bankruptcy in 2001.

“A lot of people have compared this to Lehman – I’m going to compare it to Enron,” former Treasury Secretary Larry Summers said in an interview with Bloomberg TV.

Despite all the recent endorsement from celebrities and the fame and backers of big names, Bankman-Fried wasn’t confident about the prospects for FTX in its early days.

“I thought we were going to fail,” Bankman-Fried said at a conference in June, weeks before FTX and Alameda extended the lifelines of two troubled cryptocurrency exchanges. “I thought we would fail because no one would ever use it.”

(Reporting by Hannah Lang in Washington.) Additional reporting by Anirban Sen in New York. Editing by Lanan Nguyen and Stephen Coates

Our criteria: Thomson Reuters Trust Principles.