Sam Bankman-Fried’s $16 Billion Fortune Is Eviscerated in Days (From Bloomberg.com)
~ Thursday, November 10, 2022 Blog Post ~
By Tom Maloney, November 8, 2022 at 4:52 PM
The FTX co-founder is on the brink of a 94% wealth wipeout at the hands of his billionaire rival, Binance’s Changpeng Zhao.
Just last year he said that once his FTX was big enough, it could swallow CME Group Inc. or Goldman Sachs Group Inc.
Just weeks ago, Sam Bankman-Fried was considered crypto’s version of John Pierpont Morgan, willing to throw around his massive fortune to save the industry.
The curly-haired 30-year-old known as SBF was everywhere, backing flailing projects including BlockFi, Voyager Digital and Celsius. From the Bahamas, he invested in Robinhood Markets Inc., raising speculation that he’d take over the trading app. And why not? Just last year he said that once his FTX was big enough, it could swallow CME Group Inc. or Goldman Sachs Group Inc.
And he looked poised to leverage his fortune — US$26 billion at its peak — to shape the world, donating millions to Democrats and promising that one day he’d give it all away to political causes and charity.
Now, the future of all of it is in doubt.
In the span of days, it became clear that Bankman-Fried and FTX were in the midst of a liquidity crunch and needed a bailout of their own. Changpeng Zhao’s Binance swept in to take over, and, while exact terms weren’t disclosed, it’s likely that SBF’s US$15.6 billion fortune will be annihilated at the hands of his billionaire rival.
That might come as a shock to investors including Softbank Vision Fund, Singapore wealth fund Temasek and Ontario Teachers’ Pension Plan, who sunk US$400 million into the exchange at a US$32 billion valuation in January. But it also put the broader crypto industry on notice: If SBF isn’t safe, who is?
Record wipeout
Bankman-Fried’s 53% stake in FTX was worth about US$6.2 billion before Tuesday’s takeover, according to the Bloomberg Billionaires Index, based on that fundraising round and the subsequent performance of publicly traded crypto companies.
FTX wasn’t Bankman-Fried’s most valuable asset, though. That was his crypto trading house, Alameda Research, which contributed US$7.4 billion to his personal fortune.
The Bloomberg wealth index assumes existing FTX investors, including Bankman-Fried, will be completely wiped out by Binance’s bailout, and that the root of the exchange’s problems stemmed from Alameda. As a result, both FTX and Alameda are given a US$1 value.
That leaves SBF’s net worth at about US$1 billion, down from US$15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.
Alameda was founded by Bankman-Fried, formerly a trader at Jane Street, and Gary Wang, an engineer who’d previously worked at Google. They found a niche: arbitraging pricing differences in cryptocurrencies in different countries, and soon expanded into a range of quantitative crypto trading strategies.
It seemed highly profitable. Bloomberg in September reported the firm made about US$1 billion in 2021. But questions remained about how FTX and Alameda interacted with each other.
References:
https://www.theedgemarkets.com/article/sam-bankmanfrieds-us16-billion-fortune-eviscerated-days
