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January 6, 2023

Who is Sam Bankman-Fried?

Who is Sam Bankman-Fried?

January 6, 2023
Published By American Promise

Who is Sam Bankman-Fried?

Also known as SBF, Sam Bankman-Fried is an American cryptocurrency entrepreneur, who, until Nov 8th, 2022, was worth approximately $16 billion dollars. He launched his cryptocurrency career by founding investment firm Alameda Research in 2017, which made millions buying bitcoin cheaply in the US and selling it for high prices in Japan. In 2019, he founded crypto exchange FTX (registered in Antigua and Barbuda), heavily supported by Alameda, and in 2020 founded FTX US in the United States. In 2021, FTX was valued at $18 billion dollars and saw $13 billion in trading volume daily [1].

What happened to FTX?

As with most things crypto, this is a bit complicated. By early November 2022, FTX was the second-largest crypto exchange in the world. The largest exchange, Binance, had been an early investor in FTX, but had sold out of its stake in the platform, partially in exchange for $2 billion worth of FTT. FTT was FTX’s own token, a crypto coin tied to the value of FTX. Think of it like crypto stock in FTX (FTX had actual stock, in addition to FTT, but the comparison is close enough). [2] In November, Binance CEO Changpeng Zhao announced on Twitter that he would be selling his stake of FTT. This made FTT’s price go down, making FTX worth less. FTX investors rushed to take their money out of the exchange, only for SBF to announce that FTX did not have the money on hand and would be freezing withdrawals. SBF then filed for bankruptcy for FTX and FTX US, with the company facing an $8 billion shortfall. [3]

After the bankruptcy, it came out that SBF had constructed a “backdoor” into FTX’s (already extremely messy) accounting system, allowing him to transfer billions of dollars of deposits into Alameda Research to prop it up. These were supposedly loans, but they were backed by FTT. So when FTT’s price went down, FTX’s value went down, sending FTT’s price down, lowering FTX’s value. This is what is known in financial circles as “very bad,” and led to SBF’s $16 billion fortune being wiped out in a day.  

On December 12th, SBF was arrested in the Bahamas for a number of charges filed by the US, “including wire fraud against customers and lenders, as well as conspiracy to defraud the United States and violate campaign finance laws.” [4]

SBF and Donations

SBF was well-known as the 2nd-largest Democratic donor in 2022, having given $40 million to Democratic campaigns and committees. After FTX’s collapse, he admitted that he gave an equal amount of money to Republican causes, except “All [his] Republican donations were dark,” as he used dark money groups to disguise his donations, as he didn’t want to deal with public scrutiny for them. [5] He had justified much of his political giving through his philosophy of “effective altruism,” but after the collapse admitted that his charitable persona was “this dumb game we woke westerners play” to boost his reputation. [6] In addition to his criminal charges related to his financial activities, he has also been charged with making at least $25,000 in campaign donations under someone else’s name. The SEC has also alleged that he steered funds from Alameda Research (the investing company propped up with FTX customer deposits), to federal candidates. Legally, corporations like Alameda, cannot give money to candidates. Additionally, foreign nationals, like Alameda (which was incorporated abroad), cannot give money to any American political committee. [7]


[1] https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-profile-085444366.html

[2] https://news.bloomberglaw.com/banking-law/matt-levines-money-stuff-ftx-had-a-death-spiral

[3] https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankman-fried-crypto-bankruptcy.html

[4] https://www.nytimes.com/2022/12/13/business/ftx-sam-bankman-fried-fraud-charges.html

[5] https://www.theguardian.com/technology/2022/nov/30/ftx-billionaire-sam-bankman-fried-dark-money-republicans

[6] https://www.vanityfair.com/news/2022/11/congress-sam-bankman-fried-regulation-crypto-ftx

[7] https://www.vanityfair.com/news/2022/11/congress-sam-bankman-fried-regulation-crypto-ftx

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