He is nicknamed "Musk in the currency circle". #ftx
This involves an amount of up to 80 billion US dollars.
The charges include the "Seven Deadly Crimes" including wire fraud, conspiracy to commit fraud, and conspiracy to commit money laundering.
The maximum possible sentence is 115 years in prison.
This has been called "one of the largest financial frauds in U.S. history."
However, it is difficult to focus all these elements on a young man who is only 31 years old.
The young man’s name is Sam Bankman-Fried, who graduated from an Ivy League school in Manhattan.
In 2019, he created the digital asset derivatives trading platform FTX and built it into one of the largest trading platforms in the field of virtual currency, with more than 1 million users worldwide.
As of early 2022, FTX's valuation reached US$32 billion (approximately RMB 230 billion), and Bankman-Fried was listed on the 2022 list of "100 Most Influential People in the World" by Time magazine.
However, prosperity will not last forever.
At the end of 2022, FTX suddenly fell into a liquidity crisis, followed by a series of financial problems, which eventually led to the company's bankruptcy and Bankman-Fried's account wealth was reduced to zero.
He went from being a young cryptocurrency elite that once attracted much attention to being a financial fraudster that everyone despised.
His tall building has collapsed, and the grand banquets he hosted are gone forever.
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Bankman Friedman was born in 1992 on the campus of Stanford University.
His parents are Barbara Helen Fried and Alan Joseph Bankman, professors at Stanford Law School.
As a student, Bankman-Fried showed outstanding mathematical talent.
He also attended a Canadian/American math camp for mathematically gifted high school students during high school.
He then attended MIT and received a bachelor's degree in physics, with a degree in mathematics. After graduation, Bankman-Fried joined the trading firm Jane Street Capital as a trader.
During that time, he noticed differences in cryptocurrency prices on different exchanges, and by cleverly implementing a "buy low, sell high" strategy between these exchanges, Bankman-Freed made considerable profits.
Perhaps it’s because they sensed a business opportunity in their career, or perhaps it’s because they have a keen insight into market prospects.
In 2017, Bankman-Fried founded Alameda Research, a trading firm, and in just one year, built it into a top firm in its field.
In 2019, he founded the digital asset derivatives trading platform FTX.
Bankman-Fried understood that the newly established FTX needed to find a competitive advantage when facing the established trading platforms in the market.
To this end, he adopted a more aggressive investment strategy that allowed users to trade with high leverage and higher risk while reducing exchange fees.
However, this was not enough to satisfy his ambitions.
Bankman-Fried turned his attention to new users who had not yet entered the cryptocurrency trading market.
These potential new users are typically young, thrill-seeking, financially capable, and keen on gambling.
This user portrait has a large degree of overlap with fans who are passionate about sports events, so FTX chose sports event sponsorship as its main advertising method.
FTX invested $135 million to purchase the naming rights of the Miami Heat basketball arena and renamed its main venue FTX Arena.
In addition, FTX invested millions of dollars to purchase advertising time during the Super Bowl and promoted FTX to audiences across the United States through a two-and-a-half-minute video.
In June 2021, the famous e-sports club TSM announced that it had signed a 10-year title sponsorship agreement worth US$2.1 billion with FTX, and then renamed the club to TSM FTX.
FTX came to prominence as a result, with a large influx of users and funds, making it quickly become the third largest cryptocurrency exchange in the world!
Bankman-Fried's wealth also soared, bringing his total assets to $17 billion by the age of 30.
In July 2021, FTX successfully completed a financing of US$900 million with a valuation of US$18 billion, attracting investors including well-known institutions such as SoftBank and Sequoia.
In October of the same year, Bankman-Fried appeared on the cover of Forbes magazine and was named one of the richest people under 30 in the world.
In January 2022, FTX raised $4 billion in its Series C round of financing, with a valuation of $32 billion.
Subsequently, in May of that year, Bankman-Fried was selected into the 2022 list of "100 Most Influential People in the World" by Time magazine, becoming the only person representing the crypto industry!
Bankman Friedman's attire is very different from that of traditional Wall Street elites. He prefers sweatpants, sweatshirts, T-shirts and sneakers. In addition, he insists on not buying expensive sports cars and has no interest in them.
This style is highly consistent with the characteristics of the currency circle, and is in line with the "anti-traditional" and "anti-mainstream" concepts in the field of cryptocurrency.
Bankman-Fried has been highly praised and has been dubbed "Musk of the cryptocurrency world", "cryptocurrency boss", "young genius richest man" and other titles...
However, there is a crisis spreading behind the scenes.
Perhaps FTX planted the seeds of risk from the very beginning.
Unlike traditional financial institutions, FTX, which has a daily trading volume of up to $14 billion, does not need to be made public and does not have to disclose too much information to the public and regulators.
This means that for users, the financial situation of the exchange is like "Schrödinger's cat". Unless you explore it yourself, you will not know what is hidden in the box.
On November 2, 2022, a report released by CoinDesk revealed a noteworthy issue: there are a large number of illiquid FTT tokens on Alameda Research's balance sheet. It is worth noting that the FTT token is a cryptocurrency issued by the FTX exchange. Before the FTX storm broke out, it was once ranked in the top 25 in the cryptocurrency market capitalization ranking.
It should be noted that Alameda Research was also founded by Bankman-Fried, and although he left the company as early as 2021, both Alameda Research and FTX are closely related to the same person.
Yes, it does have a bit of a “left hand pouring from the right hand” meaning.
Bankman-Fried appears to be constantly changing hands on funds, both increasing the value of the token and expanding the balance sheet. According to foreign media reports, Alameda Research has long used this portion of FTT tokens as collateral to obtain hundreds of millions of loans. This means that the market has seriously overestimated the value of FTT tokens and Alameda Research's assets.
Once the issue came to light, FTX’s clients and many investors demanded to withdraw their funds, triggering a run. It is said that in just one day, users withdrew $5 billion! A source later broke the news to the media, saying that FTX had a total of $16 billion in customer assets, half of which was loaned to Alameda Research.
As Bankman-Fried failed to successfully find opportunities to acquire or invest in FTX, FTX, Alameda Research and other affiliated companies declared bankruptcy on November 11, and Bankman-Fried also resigned as CEO of FTX and other companies.
At this moment, it has only been three years since FTX was founded.
It’s only been two years since Bankman-Fried appeared on the cover of Forbes.
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But after the FTX scandal, many companies and celebrities who had cooperated with FTX in promotions cut ties with FTX. The Heat’s home stadium and TSM also removed the FTX name.
In November 2022, Bankman Fried faced a class action lawsuit from investors who claimed that Bankman Fried violated Florida law, causing consumers to suffer losses of more than $11 billion (RMB 80.3 billion)!
The seven charges Fried faces include:
Wire fraud against FTX customers;
Wire fraud charges against a lender of FTX affiliate Alameda Research;
One count of conspiracy to commit wire fraud against FTX customers;
a wire fraud conspiracy charge against Alameda Research’s lenders;
Securities fraud conspiracy against FTX investors;
Commodity fraud and conspiracy charges against FTX customers;
Money laundering conspiracy.
These charges have been described as the “seven deadly sins” of the cryptocurrency world.
The lawsuit states that FTX caused consumers to suffer losses based on "false statements and fraudulent conduct." FTX founder Fried and some celebrities are accused of participating in, assisting and promoting the platform's activities.
According to bankruptcy court documents, FTX Group revealed in its bankruptcy filing that it had liabilities ranging from $10 billion to $50 billion.
Federal prosecutors called it "one of the largest financial frauds in American history."
On November 2, 2023, after 15 days of testimony and approximately four and a half hours of deliberation, the jury unanimously found FTX guilty of seven charges, including wire fraud, conspiracy to defraud, and conspiracy to launder money.
Bankman-Freed was found guilty of all charges.
The trial, hailed as "the largest financial fraud case in American history," began in early October and lasted for a month. The sentencing date is scheduled for March 28, 2024.
If Bankman-Fried is sentenced to the maximum penalty, he will face up to 115 years in prison!
Some readers may remember that both of his parents were well-known law professors.
The media also conducted an in-depth investigation into his parents.
Bankman-Fried claims that his parents were not involved in “any relevant part” of FTX’s operations.
However, this statement has not been widely accepted.
Court documents show that the couple discussed matters involving the transfer of more than $10 million in finances and real estate with their son.
Relevant people believe that the couple either knew about their son's fraudulent plan but allowed it to proceed, or deliberately ignored the risks in the transaction.
The Freeds attended the trial.
Outside the court trial, a bigger storm was brewing.
Since FTX and Alameda Research have close ties with other areas of the cryptocurrency market, multiple cryptocurrency crashes occurred after FTX's bankruptcy.
In November 2022, the price of Bitcoin fell sharply, by more than 14%, falling below $16,000 at one point and hitting a low of $15,668.
Almost at the same time, within 5 days, Ethereum plummeted by about 19%, from more than US$1,600 to US$1,091.
The drop is staggering.
Compared with the unknown small exchanges, FTX, as the third largest exchange in the world at that time, was relatively reliable...
If problems arise with it, the blow to the cryptocurrency community may last for a long time and it may be difficult to recover.
Before being arrested, Bankman-Freed apologized in a message on social media.
"I'm so sorry, that's the most I should say..."
But it was of no avail.
The turbulent cryptocurrency market gives people an opportunity to re-examine its value:
Does the rise and fall of each number really have something to do with the supply and demand relationship in the market?
It is really sad that Bankman Friedman went from being a billionaire to a prisoner in just a few years.
Investment is risky, please be cautious when entering the market...