• Fri. Jun 21st, 2024

Introducing Sam Bankman-Fried – A Closer Look at the Infamous FTX Founder

Louise Villalobos

ByLouise Villalobos

Jan 28, 2024
Introducing Sam Bankman-Fried - A Closer Look at the Infamous FTX Founder

When he launched his crypto exchange FTX a few years ago, many considered Sam Bankman-Fried to be the poster boy for cryptocurrency. However, the narrative changed in November 2022, when his crypto empire went crumbling down. In this article, we will dive deeper into Bankman-Fried’s life. Learn his educational background and how he founded the fallen crypto exchange FTX.

Introducing Sam Bankman-Fried

Sam Bankman-Fried is the son of two law professors. He was born in 1992. The FTX founder was lucky enough to join one of the top high schools (Crystal Springs Uplands School) in the United States. After completing high school, he joined the Massachusetts Institute of Technology (MIT) for his bachelor’s degree in physics and a mathematics minor.

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While at MIT, Bankman-Fried got an opportunity to work as an intern at the proprietary trading company Jane Street Capital. The same firm later hired him after his graduation.

In 2017, Bankman-Fried quit his job and started his own trading company called Alameda Research. He partnered with Tar Mac Aulay for his new venture.

Bankman-Fried Launches FTX

Two years after founding Alameda Research, Sam Bankman-Fried launched his crypto exchange FTX. The crypto trading platform gained massive popularity in 2020 during the Covid-19 pandemic and became among the top five.

Bankman-Fried also became popular at the time not only because of being a “poster boy for cryptocurrency” but also due to his donations worth millions, which he channeled to various charity causes and politicians.

Enter Caroline Ellison

FTX was becoming bigger by the day. For this reason, Bankman-Fried decided to appoint his then-girlfriend, Caroline Ellison, as the CEO of Alameda Research so that he could focus on his cryptocurrency exchange. The two were former employees of Jane Street Capital. They had been living together at Bankman’s penthouse in the Bahamas even before Ellison’s new appointment.

When FTX collapsed in November 2022, it was discovered that Bankman-Fried had instructed Ellison to oversee the risky bets that employees at Alameda Research were placing in the financial markets. After the revelations, the trading firm CEO pleaded guilty to charges leveled against her and agreed to work with federal prosecutors.

How Sam Bankman-Fried Made Money to Build His Crypto Empire

Before founding Alameda Research and FTX, Bankman-Fried participated in arbitrage trading. This strategy involves buying a cryptocurrency from one market and selling it to another as quickly as possible to pocket the price difference. In Bankman-Fried’s case, the former crypto guru bought Bitcoin in the United States and sold it in the Asian market. At one point, he said he made about 10% profit in every arbitrage trade.

Accusations Leveled Against Bankman-Fried

The US federal prosecuted have accused Sam Bankman-Fried of misappropriating FTX customer funds, which he allegedly transferred to Alameda Research to be used for trading. Moreover, the FTX founder is accused of making significant political donations to US politicians using client funds. He’s also said to have spent some of the funds to buy real estate in various countries, including the Bahamas.

Accusations Leveled Against Caroline Ellison

According to US federal prosecutors, Caroline Ellison committed securities fraud, money laundering, commodities fraud, and wire fraud. As mentioned earlier, she pleaded guilty to all charges. Last year, Ellison told the jury that her former ex-boyfriend Bankman-Fried forced her to defraud users of his crypto exchange.

How FTX Collapsed

At the start of November 2022, crypto-focused news house Coindesk tweeted that Bankman-Fried’s Alameda Research only had FTT (FTX’s native token) on its balance sheet. Moreover, the FTT holding had been used to collateralize numerous loans.

On November 6th, 2022, crypto exchange Binance announced it would sell its FTT holdings worth roughly $520 million. The announcement caused panic among FTX users, who began withdrawing funds from the exchange. However, FTX was unable to process all withdrawals due to liquidity issues. On November 11th, 2022, the crypto trading platform filed for Chapter 11 of bankruptcy protection.

That said, Bankman-Fried will know his fate on March 28th, 2024, when the court delivers its ruling regarding his sentencing.

Louise Villalobos

Louise Villalobos

Louise Villalobos is an adept writer, renowned for her compelling articles that illuminate and engage. Her prowess in breaking down intricate subjects provides readers with clarity and nuance. With a vast and varied portfolio, Louise has solidified her standing as a distinguished voice in contemporary journalism.