What the Fall of Young Billionaire Sam Bankman-Fried's Crypto Empire Says About the Industry
Bloomberg estimates that FTX founder Sam Bankman-Fried lost 94% of his fortune in one day.
2022 looked like it would be the best year for young crypto entrepreneur Sam Bankman-Fried.
He was 30 years old and FTX, the company he founded in 2019, was among the biggest platforms for buying and selling digital currencies.
According to Forbes magazine, the fortune of this son of Stanford University professors and a graduate of the Massachusetts Institute of Technology (MIT) reached US$ 24 billion this year, almost tripling the value with which he ended 2021.
But almost from one second to the next, everything fell apart: your company is about to go bankrupt.
The FTX crisis has been compared by some experts to the collapse of investment bank Lehman Brothers in the great crash of 2008, with many questioning whether the company's demise could have a ripple effect on the entire cryptocurrency industry.
Bitcoin, the largest digital currency, has reached its lowest value since 2020, just as other cryptocurrencies have been dragged into a well whose bottom is not known where it is.
As if it were a TV drama, frantic negotiations have erupted in recent days. FTX's biggest rival, Binance, has publicly said it would buy the competitor. Hours later, he backed out of the acquisition.
Amid the chaos, this Thursday (11/10) Bankman-Fried himself took to Twitter to apologize and acknowledge his mistakes.
"I did m... I should have done better," he wrote.
End of Twitter post, 1
The young billionaire's nightmare came true this week. According to Bloomberg estimates, Bankman-Fried's net worth dropped from $15.6 billion to nearly $1 billion, a 94% loss in wealth, the biggest one-day collapse among tycoons whose fortunes are monitored by the organization. .
reasons for the fall
Why did FTX crash? After rumors that the company lacked sufficient liquidity, customers began frantically withdrawing hundreds of millions of dollars in fear of losing their funds.
The importance of FTX to the industry is so great that investment bank JPMorgan Chase has warned that cryptocurrency markets could face a ripple effect of crashes.
Changpeng "CZ" Zhao, CEO of Binance, said he would bail out his rival, but hours later withdrew from trading
The BBC tried to contact FTX but received no response. A notice on their website read: "At this time, FTX cannot process withdrawals. We strongly advise against making deposits."
Experts are concerned about what could happen in this market, especially as the cryptocurrency world is experiencing a “crypto winter”, i.e. a sustained stage of low prices.
"This is a black swan event that brings more fear into the crypto world," Dan Ives, senior equity analyst at Wedbush Securities, told the BBC.
US authorities are investigating the management of the funds within FTX and other companies run by Bankman-Fried.
A New Age Millionaire
Bankman-Fried — who some have dubbed the Warren Buffet of his generation — has become “a beacon of hope for investors large and small,” BBC tech analyst Joe Tidy said after cryptocurrency prices plummeted early in the year. year.
"Over the past six months, the young man has provided generous rescue packages to struggling companies, secured profitable acquisitions and given prominent interviews."
Bankman-Fried at Forbes Magazine's 'Iconoclasts' Gathering
João Fellet tries to understand how Brazilians reached the current degree of division.
episodes
End of Podcast
In several of them, including one to Vox in March 2021, Bankman-Fried explained his vision: get rich and then distribute the profits.
"If what you're trying to do is donate," the businessman said, "you should try to make as much [money] as you can and donate as much as you can."
This approach made Bankman-Fried one of the biggest single donors to US President Joe Biden's campaign.
And that led him to cultivate a public image close to the idea of Robin Hood.
For Joe Tidy, many of these interviews are costing him dearly in these difficult times, particularly when it comes to the health of the virtual currency system.
"Now it looks like your company joins the growing list of cryptocurrency companies that have gone bankrupt due to a recurring problem: lack of cash reserves."
"FTX is not the first company to succumb to the so-called 'crypto winter' we find ourselves in," he concludes. "But it's by far the biggest."
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