Samuel Benjamin Bankman-Fried, born on March 5, 1992, and widely recognized as SBF, is an American entrepreneur who was found guilty of fraud and related offenses in November 2023. He established the FTX cryptocurrency exchange, which gained acclaim as a leading figure in the crypto industry, boasting over 130 international affiliates. At the height of his financial success, he was listed as the 41st richest American in the Forbes 400.
Bankman-Fried’s amiable “math nerd” image concealed serious issues within FTX. In November 2022, as indications of possible fraudulent activities emerged, customers rapidly withdrew their funds, leading to the company’s bankruptcy. On December 12, 2022, he was apprehended in the Bahamas and subsequently extradited to the United States, where he faced seven criminal charges, including wire fraud, commodities fraud, securities fraud, money laundering, and violations of campaign finance laws.
In the case of United States v. Bankman-Fried, he was convicted on all seven counts related to fraud, conspiracy, and money laundering. On March 28, 2024, he received a 25-year prison sentence and was ordered to forfeit $11 billion. This trial became one of the most infamous instances of white-collar crime in the United States, with financier Anthony Scaramucci referring to Bankman-Fried as “the Bernie Madoff of crypto.”
Personal Life
Bankman-Fried was born on March 5, 1992, in Stanford, California. He is the offspring of Barbara Fried and Joseph Bankman, both of whom hold professorships at Stanford Law School. His grandmother, Adrienne Fried Block, was a distinguished musicologist, while his aunt, Linda P. Fried, serves as the dean of the Mailman School of Public Health at Columbia University.
His younger brother, Gabriel (born in 1995), has held various positions, including legislative assistant, Wall Street trader, and director of the nonprofit organization Guarding Against Pandemics, along with its related political action committee. This organization faced federal investigation after it was revealed that a significant portion of the US$35 million in its accounts had been misappropriated by his elder brother from customer accounts at Alameda Research.
Additionally, both of his parents are currently facing legal action from the new proprietors of FTX, who are seeking the return of assets valued at over $32 million that Sam had transferred to them as gifts, including cash and a residence. While his parents acknowledge that these assets were given as gifts, they refute any allegations of misconduct and are actively contesting the claims in court.
Bankman-Fried participated in Canada/USA Mathcamp, a summer program designed for high school students with exceptional mathematical abilities. He completed his secondary education at Crystal Springs Uplands School in Hillsborough, California, and graduated from the Massachusetts Institute of Technology in 2014 with a bachelor’s degree in physics and a minor in mathematics. During his time at MIT, he resided in a coeducational group house known as Epsilon Theta.
Career
In the summer of 2013, Bankman-Fried served as an intern at Jane Street Capital, a proprietary trading firm specializing in international ETFs. After completing his studies at MIT, he returned to the firm in a full-time capacity. In September 2017, he departed from Jane Street and relocated to Berkeley, California, where he briefly held the position of director of development at the Centre for Effective Altruism (CEA) from October to November 2017.
In November 2017, with financial backing from billionaire programmer Jaan Tallinn and investor Luke Ding, Bankman-Fried and Tara Hedley (née Mac Aulay) of CEA co-founded the quantitative trading firm Alameda Research. By 2021, Bankman-Fried had acquired approximately 90 percent ownership of Alameda Research. In January 2018, he orchestrated an arbitrage trade, transferring up to $25 million daily to capitalize on the price disparity of bitcoin between Japan and the United States. After attending a cryptocurrency conference in Macau in late 2018, he moved to Hong Kong.
In April 2019, Bankman-Fried established the FTX cryptocurrency derivatives exchange, which commenced operations the following month. By September 2021, he and the senior management team of FTX had relocated from Hong Kong to the Bahamas. Bankman-Fried was recognized in the 2021 Forbes 30 Under 30 list but later appeared in the Forbes 2023 Hall of Shame, which highlights ten individuals the publication regrets including.
On December 8, 2021, Bankman-Fried, along with other industry leaders, provided testimony before the Committee on Financial Services regarding the regulation of the cryptocurrency sector. On May 12, 2022, it was revealed that Emergent Fidelity Technologies Ltd., predominantly owned by Bankman-Fried, had acquired 7.6 percent of Robinhood Markets stock. In a November 2022 affidavit submitted to the Eastern Caribbean Supreme Court, prior to his arrest, Bankman-Fried disclosed that he and FTX co-founder Gary Wang had collectively borrowed over $546 million from Alameda Research.
Views on charity and market regulation
Bankman-Fried has openly expressed his support for effective altruism, asserting that he was engaged in “earning to give” as a form of “altruistic career.” He stated that his donations were made “not out of personal interest but rather based on projects that have been empirically shown to be the most effective in aiding individuals,” particularly those aimed at mitigating existential threats such as nuclear conflict, pandemics, artificial intelligence, and challenges to American democracy.
He was affiliated with Giving What We Can and contributed approximately half of his salary from Jane Street to charitable causes. In June 2022, he committed to the Giving Pledge; however, his name was removed from the list in December 2022 following his arrest. Bankman-Fried is the founder of Future Fund, which included Scottish philosopher and author William MacAskill, a key figure in the effective altruism movement. Following the downfall of FTX, all members of Future Fund resigned simultaneously. As of September 1, 2022, Future Fund reported commitments of around $160 million to 110 nonprofit organizations.
The official rationale for FTX’s move to the Bahamas was the favorable regulatory climate, and Bankman-Fried openly contemplated addressing the nation’s $9 billion national debt. In November 2022, he engaged in an interview with Vox writer Kelsey Piper via private messages on Twitter. He admitted that his and his company’s push for cryptocurrency regulation was insincere and merely “public relations,” asserting that regulators “exacerbate issues” and “do not safeguard customers at all.” Regarding his views on “ethics,” he acknowledged that it was “largely a facade” and characterized ethics as a “superficial game played by progressive Westerners to gain social approval.” He later clarified that he was referring to ESG, CSR, and greenwashing, rather than effective altruism, bed nets, and pandemic prevention.
Bankruptcy of FTX
In November 2022, Changpeng Zhao, the CEO of Binance, announced via Twitter that his company planned to divest its holdings of FTT, the token associated with FTX. This announcement precipitated a surge in customer withdrawals from FTX, which the exchange was unable to accommodate. Binance had acquired $529 million worth of FTT during a sale of its equity in FTX in 2021. Zhao’s tweet followed a CoinDesk report indicating that a significant portion of Alameda’s assets, the trading firm owned by Bankman-Fried, were held in FTT. Reports from Bloomberg and TechCrunch suggested that any divestment by Binance could significantly affect the price of FTT due to the token’s limited trading volume. Zhao’s announcement regarding the impending sale, coupled with a public dispute with Bankman-Fried on Twitter, resulted in a decline in the value of FTT and other cryptocurrencies. Prior to this, Zhao had publicly criticized Bankman-Fried’s lobbying activities.
On November 8, Zhao declared that Binance had entered into a nonbinding agreement to acquire FTX in light of a liquidity crisis facing the exchange. He indicated that Binance would conduct due diligence promptly and advised all cryptocurrency exchanges to refrain from using tokens as collateral. Zhao also anticipated that FTT would experience “high volatility in the coming days as developments unfolded.” Following this announcement, FTT’s value plummeted by 80 percent. The following day, the Wall Street Journal reported that Binance had opted not to proceed with the acquisition of FTX, citing concerns over the mishandling of customer funds and ongoing investigations into FTX as the rationale for their decision. Amid this turmoil, Bankman-Fried’s status as a billionaire was revoked, according to the Bloomberg Billionaires Index. The day after, Bloomberg reported that both the Securities and Exchange Commission and the Commodity Futures Trading Commission were investigating FTX and its connections to Bankman-Fried’s other ventures.
On November 11, 2022, FTX, Alameda Research, and over 130 affiliated legal entities filed for bankruptcy. According to anonymous sources reported by Reuters, earlier in 2022, Bankman-Fried had transferred no less than $4 billion from FTX to Alameda Research without informing the insiders of either company or the public. The sources indicated that the transferred funds included customer deposits and were reportedly secured by FTT and shares in Robinhood. An anonymous source referenced by The Wall Street Journal mentioned that Bankman-Fried had acknowledged that Alameda owed FTX approximately $10 billion, which was collateralized by customer funds held by FTX, which at that time had $16 billion in customer assets. Furthermore, anonymous sources cited by The Wall Street Journal revealed that Caroline Ellison, the Chief Executive of Alameda Research, informed employees that Bankman-Fried was aware that FTX had utilized customer funds to lend to Alameda in order to fulfill its obligations.
Bankman-Fried stepped down as CEO of FTX on November 11, 2022, and was promptly succeeded by John J. Ray III, who had previously led the recovery of Enron assets for creditors through litigation against various banks during the Enron Bankruptcy case from 2004 to 2009. On the same day, FTX and its associated entities submitted their bankruptcy filings in Delaware.
The day following FTX’s bankruptcy declaration, on November 12, Bankman-Fried was interviewed by the Royal Bahamas Police Force. On November 17, Ray provided a sworn declaration in bankruptcy court stating that, according to the company’s records, Alameda Research had lent $1 billion to Bankman-Fried, remarking, “Never in my career have I witnessed such a total failure of corporate governance and such a complete lack of reliable financial information.”
In the statement that Bankman-Fried had prepared for delivery to the House Financial Services Committee in December 2022, he asserted that “[FTX] is solvent,” yet he claimed to have been “pressured” by Ryne Miller, FTX’s general counsel and a former partner at the Sullivan & Cromwell law firm, to file for bankruptcy. He further suggested that the management team and the legal firms overseeing the bankruptcy proceedings were leveraging the Enron case as a means to secure excessively high fees from the process. Following his arrest and subsequent imprisonment, he did not provide testimony before Congress; instead, John J. Ray III took the stand.
