FTX: the Legend of Sam Bankman-Fried | FT Film

Image: Financial Times

Financial Times has recently produced a documentary, adding to the collection of previously released documentaries about cryptocurrency, and presented a look into the rise and fall of Sam Bankman-Fried, founder of FTX – an ambitious attempt to combine traditional finance strategies with the cryptocurrency market. The film is produced, directed, and edited by Daniel Garrahan, and filmed by Petros Gioumpasis and Gregory Bobillot.

The Rise

Sam Bankman-Fried, better known as SBF, is the founder of FTX, one of the leading cryptocurrency trading platforms. The FTX exchange rose to prominence within just a few years, raising its market worth from $32 billion. But much like the legend of Icarus, who flew too close to the sun, flashy flames extinguished its glitter faster than expected.

SBF had formerly worked at Jane Street, a trading firm – where he left to pursue something more meaningful for him at the Centre for Effective Altruism. SBF was passionate about accumulating wealth and distributing it among those in need. This ambition was realised when he founded Alameda Research, which eventually birthed FTX – an exchange that sought to use traditional finance strategies to provide investors with an easy way out in the cryptocurrency market.

As FTX grew, endorsement from Corporate entities and celebrities surged. Everyone seemed to be falling for the notion of SBF being Elon Musk-like – making ‘big money moves’. This growing popularity drew crowds with big names investors like Sequoia, Paradigm, Ontario Teacher’s Pension Plan and even BlackRock making big investments.

The Fall

The seemingly turbulent dream quickly experienced a free fall. What happened? CoinDesk, on the 2nd of November, uncovered some suspect connections between Alameda Research and SBF’s FTX exchange – which began spreading financial ruin. It was uncovered that a good chunk of the supposed assets Alameda had on its books were tokens manufactured from thin air.

Alarmed by this discovery, Changpeng Zhao known as CZ from Binance – a transcendent global cryptocurrency exchange, immediately tweeted to his teeming enthusiast and investors that he’d be liquidating some of his holdings of the FTT token due to the recent revelation. As a result of this action, FTT’s exchange rate started to dive southward – signaling a financial meltdown for FTX and discouraging traders from taking up positions.

The swiftness and severity of the circumstances had some onlookers wondering if FTX were insolvent. Frustrations grew ever higher as CZ bantered around buying up FTX, theorizing that he would use its conditionings to benefit Binance. Financial panic quickly spread when it became apparent that FTX was running out of funds. The events happening became too convoluted to be unfurled by SBF. So he resorted to a buyback program that failed in barely a few days, leaving the FTX crippled and uncertain. By November 8th, CZ had backed out from purchasing them and ended their woes officially.

The fantasy tale is inspiring but somewhat chaotic — one where ‘big money moves’ become a colossal failure as life-changing opportunities lay smeared away within seconds! It’s a hard truth that investors must accept when trading for gain; there are always two sides of the coin involved – success or dire loss.

After FTX declared insolvency, its cash reserves were seen to have a short supply – leaving customers and investors with no choice but to write off their investments. Starting from $1 billion, the amount increased astronomically over time as creditors sought refunds for their deposits; regulators put Sam Bankman-Fried (SBF) on trial for fraudulence in light of these events and charged him with multiple counts such as wire fraud, conspiracy to commit wire fraud, and campaign finance violations.

He attempted to salvage the situation by apologizing and bearing part of the responsibility, but this wasn’t enough for some. He was arrested in December 2022, two months after FTX declared bankruptcy — subsequently put on bail with a hefty $250 million attached for his release.

The Way Forward

Sam Bankman-Fried is currently facing legal proceedings from US regulators and venture capital companies who invested big money into FTX – losing millions when everything suddenly fell apart. Nonetheless, SBF managed to protect his online assets that were not connected directly or indirectly to FFT as opposed to what has happened regarding Gary Wang and Nishad Singh (both former executives at Alameda Research) — both have to plead guilty pending further investigations.

SBF’s story of excessive ambition ultimately leading up towards unsuccessful ends definitely serves as an important lesson: Although digital markets present huge opportunities, they aren’t exempt from risk; investors should study carefully before deciding where best their funds are channelled.