Sam Bankman.. the cryptocurrency genius who fooled the world
In the fast-paced and volatile world of cryptocurrency, the name Sam Bankman emerged at rocket speed, described as a "technological miracle" and a "genius mind" after founding the FTX exchange, which became one of the largest digital asset trading platforms in the world in just a few years. Before turning thirty, his fortune reached tens of billions, and he became a familiar face at technology and economic conferences, appearing alongside prominent political figures like Bill Clinton and Tony Blair.
Bankman was not just a traditional businessman; he presented himself as an advocate for the idea of 'effective altruism', which is accumulating wealth for the purpose of donating it to humanitarian causes. He wore simple clothes, drove a modest car, and promoted the image of the 'reclusive genius' living a life away from extravagance. However, this ideal image soon crumbled as his financial empire disintegrated.
The rise of FTX and a promising platform suddenly collapses
FTX launched in 2019 and quickly competed with the market giant Binance thanks to its promises of safe and fast trading, attracting hundreds of thousands of customers, from individual investors to massive investment funds. However, behind the scenes, the company relied on risky practices. A report from CoinDesk in November 2022 revealed that FTX used its own token FTT as collateral for billions of dollars in loans for its sister hedge fund Alameda Research. As this information leaked, investors lost trust and began withdrawing their funds en masse, in a scene reminiscent of a 'bank run.' The platform collapsed within days, revealing a financial shortfall of 8 billion dollars, and declared bankruptcy on November 11, 2022, according to a report by The Guardian.
On November 2, 2022, the FTX collapse began to publicly unfold when CoinDesk published a leaked report revealing the balance sheet of Alameda, FTX's sister company, which showed that a large portion of its assets were made up of the FTT token that the platform created itself, making its financial position fragile and based on an illiquid and speculative asset.
After that, Changpeng Zhao, the founder of the competing platform Binance, tweeted announcing that his platform would sell all of its FTT tokens, causing a severe panic. Investors quickly began withdrawing their funds collectively, trying to protect their money, while Sam attempted to calm things down via Twitter, insisting that FTX was fine and had enough assets to cover all client deposits, which later turned out to be a complete lie. In a desperate attempt to save itself, FTX turned to its competitor Binance, which signed a non-binding letter of intent to acquire it, but the deal collapsed the next day after media reports revealed mismanagement of client funds, marking the final nail in the company's coffin.
The truth of the fraud
With the bankruptcy proceedings, horrifying truths began to emerge. John Ray, the new CEO of FTX who previously oversaw the bankruptcy of Enron, described the situation as a complete failure of corporate controls and a total absence of reliable financial information unprecedented in his professional career. Bankruptcy filings revealed that FTX had secretly exploited customer deposits to lend to Alameda for high-risk speculative investments, in addition to funding luxury real estate and making massive political donations, without any meaningful separation between customer funds and the company's own money. With the collapse of the cryptocurrency market in 2022, Alameda was unable to repay its loans, revealing a massive budget gap$ETH
