Even before people started to figure out what was really going on with FTX’s Sam Bankman-Fried—before the panic, the investigations, and, finally, the horrific collapse—a sense of impending doom had begun to creep through his complicated crypto business.
One query recurred across FTX, the trade that had converted his initials into a sign of new wealth and power: Where is SBF?
Current and former employees believe Bankman-Fried vanished. Unexpectedly, a department missed the October paycheck. Issues arose.
Now it’s obvious how wrong. The affair has startled crypto gamers who giddily welcomed Bankman-Fried as their J.P. Morgan and left them searching for analogies.
Crypto’s Lehman Brothers? Is it an Enron-like scandal that might reveal corruption? Federal authorities are investigating.
The main issue after the Chapter 11 filings Friday morning was: Will 1 million FTX customers ever get their money back? Silicon Valley titans who supported Bankman-Fried are certain to fail.
Many broad outlines are well recognized. Bankman-debt, Fried’s corporate conflicts, and customer fund misuse investigations. Uncertainty and frantic fundraising. The Binance-Changpeng Zhao conflict gave FTX a lifeline but took it back a day later.
However, interviews with more than a dozen employees, former employees, and persons familiar with FTX and its sister companies portray a grimmer image. Bankman-Fried duped lawmakers, media, and venture capital royalty with his bedhead, tube socks, and promise to give away his riches.
He may have deceived himself too.
“I’m hesitating since I typically sleep on a bag,” he remarked, referring to his beanbag chair. On a Zoom call, Bankman-Fried answered reporters’ queries about FTX’s relationship with Alameda Research, his family office’s crypto-trading firm. He lived in the Bahamas with Alameda leaders.
Previously unsaid: the two companies had few borders.
No FTX spokesman was available.
Bankman-Fried fell due to FTX-Alameda ties. The SEC is probing his firm’s interconnectedness and if the firm misused consumer monies.
Bankman-brand. Fried’s Miami arenas and MLB umpires had FTX logos.
Alameda, though, ran quietly. The 30-person company made $1 billion last year. After leaving Jane Street, Bankman-Fried created Alameda in 2017. FTX came two years later.
Trading firms and exchanges are dangerous.
Some knew the two companies were financially linked. FTX funded a person that raised money from Alameda Ventures, its VC arm.
Alameda’s problems sank Bankman-empire.
Last week, Alameda’s balance sheet showed FTX’s FTT token debts, making investors nervous. On Sunday, Binance CEO CZ stated that his exchange was liquidating its $500 million FTT holdings. Panic ensued.
Zhao offered to rescue FTX on Tuesday but swiftly backed out.
“The difficulties are beyond our control or ability to help,” Binance said Wednesday.
“Sad day,” said CZ. Added a sobbing emoji.
Issues
Bankman-behavior Fried’s had alarmed direct reports for weeks before FTX’s concerns became public.
One person reported one department had payroll issues weeks ago with little explanation.
It occurred before. Bonus delays in spring created pay issues. TerraUSD, Three Arrows Capital, and Celsius began to falter around then.
The corporation pushed for remuneration packages in devalued FTX equities.
According to sources, prominent market makers and hedge fund traders withdrew millions from FTX.
One red flag: Withdrawals that ordinarily take seconds took hours, adding to concerns that something was odd, one person said.
Large shareholders were nevertheless surprised. Binance’s Tuesday offer extension alerted many investors to FTX’s issues.
According to Bloomberg records, some investors and staff remained optimistic about FTX’s future and refused to sell their shares to prospective buyers. The documents showed that FTX purchasers were unable to identify secondary sellers on Monday.
The FTT token plummeted 80% in 24 hours, sending VC firms scrambling to assess the damage. FTX’s best-known sponsor, Sequoia Capital, tweeted its losses.
As the crisis worsened, the firm’s employees and consumers described internal pandemonium. One said the balance sheet they saw showed no liquidity issues, prompting them to suspect a distinct set of books.
Bankman-Fried represented crypto’s transparency and decentralization.
“There was this cult of personality surrounding Sam Bankman-Fried, where he was considered as this kind of visionary, once in a lifetime mind,” said 29-year-old software engineer and blogger Molly White, who wrote “Web3 is Going Just Great” for more than a year about virtual asset fraud.
“Those often ascribe intelligence to people who are merely very wealthy,” she remarked.
SBF’s whereabouts throughout his empire’s demise are just becoming clear.
PIF and Mubadala representatives declined to comment.
Anthony Scaramucci, who sold part of SkyBridge Funds to FTX Ventures in September, raised capital.
“We started fundraising for him”. After the firm collapsed, talks stalled. While the boss was away, some staff tried to generate money themselves.
The Miami Heat arena’s naming rights, FTX US Derivatives, and Embed, a trade clearing firm, were all up for grabs. A source said Voyager, saved from bankruptcy by Bankman-Fried, called investors to buy itself back.
According to sources, FTX.US approached several companies that thought they could give cents on the dollar. They thought buying was too risky after the bankruptcy was announced this week.
Leaderless
Bankman-Fried didn’t appear out of his depth earlier this year while the crypto market teetered. However, Alameda and FTX.US noticed the departure of two of his inner group earlier in the summer.
In October 2021, Ellison and Sam Trabucco took over Alameda and FTX from Bankman-Fried.
In August, Trabucco tweeted that he had “substantially curtailed” his participation in the company for months, hinting he was leaving after only starting the job.
Brett Harrison, who ran FTX.US, left shortly after without explaining where he went.
Bankman-Fried appeared resigned by Thursday night as his supporters dwindled. He had no finance strategy despite tweeting earlier about letters of intent and term sheets.
“Realistically we’d need at least $4 billion pledged by morning if this pathway was going to work,” he wrote. . He claimed to speak with investors was pointless unless someone had a billion ready to sign in an hour.
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