The Fall of Young Billionaire Sam Bankman-Fried: Bankruptcy at 30
The trial of the former it boy of cryptocurrency, Sam Bankman-Fried begins this week. A look back at his fall from grace and the collapse of his platform FTX.
The fraud trial of Sam Bankman-Freid, 31, begins this week, just eleven months after the collapse of his cryptocurrency empire. In November 2022, Bankman-Freid’s crypto exchange, FTX filed for Chapter 11 bankruptcy, prompting him to resign from his leadership role in the company. At the time, he was one of the youngest billionaires in the world and the collapse of FTX was compared by some experts in the field with the collapse of the investment bank Lehman Brothers in the great crisis of 2008.
Sharp drop in Sam Bankman-Fried’s fortune
In a statement, FTX assured that filing for bankruptcy was the appropriate measure to manage the company’s assets and protect the interests of its shareholders. Within hours, FTX users withdrew about $6 billion, with around a million unable to withdraw their investments.
Bankman-Freid also saw his wealth collapse, although considering his alleged responsibility, he makes for a far less sympathetic character than the clients who had invested in his platform. According to the Bloomberg Billionaires Index, before the company declared bankruptcy, Bankman-Freid had a net worth valued at around $15.6 billion, and shortly after it dropped to $1 billion, or by around ninety-four percent.
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Earlier in 2022, when Bankman-Freid began to see that the balance sheets were not adding up, he attempted to transfer $4 billion from FTX to the sister company that specialized in trading cryptocurrencies that he also owned, Alameda Research. However, this back and forth forms part of the criminal charges that he now faces because it marks that there was no clear division between the two companies.
FTX frequently made loans to Alameda using money that customers had deposited in the exchange for business purposes and when the company declared bankruptcy it became clear to FTX users that they would not be paid back. Unlike a traditional bank, FTX users are not protected by the FDIC which insurers up to $250,000 in the case of a bank failure.
“I screwed up twice”, Bankman-Fried posted Thursday on his Twitter profile after almost 48 hours in silence, during which his clients had their money frozen.
On 12 December, while living in the Bahamas, Bankman-Freid was arrested and extradited to the United States. The US Southern District of New York has levied an indictment containing eight charges against him with the trial to determine his innocence beginning this week. If found guilty on all counts, the former “it boy” of the crypto sphere could be sentenced to up to 115 years in prison.