Who Is Sam Bankman-Fried?

Sam Bankman-Fried, also known as “SBF,” founded the FTX cryptocurrency exchange and, after its collapse, was found guilty of fraud and other crimes on Nov. 3, 2023. Being a finance and cryptocurrency entrepreneur, he founded both FTX and the crypto trading company Alameda Research.

He rose to prominence as head of one of the world’s largest cryptocurrency exchanges, with a personal net worth once exceeding $26 billion, before an abrupt end to his digital currency empire in early November 2022. Bankman-Fried maintained his innocence and claimed he never committed fraud or intentionally cheated customers. A New York jury found Bankman-Fried guilty of two counts of wire fraud, two counts of wire fraud conspiracy, and three other conspiracy charges.

Bankman-Fried’s Arrest, Indictment, Bond Details, and Conviction

On Nov. 11, 2022, Bankman-Fried resigned from FTX, and the company filed for Chapter 11 bankruptcy after it collapsed earlier that month following a report by CoinDesk highlighting potential leverage and solvency concerns involving Alameda Research. The failure of FTX shook the volatile crypto market, which lost billions at the time, falling below a $1 trillion valuation.

Bankman-Fried was arrested in the Bahamas, where FTX was headquartered, and extradited to the U.S. in December 2022. He was indicted on multiple criminal fraud charges levied by Damian Williams, the U.S. Attorney of the Southern District of New York. Williams called Bankman-Fried’s actions “one of the biggest financial frauds” in American history.

Bankman-Fried also faced accusations from the Commodity Futures Trading Commission (CFTC) that included manipulating the price of his exchange’s FTT token and front-running customers.

U.S. Attorney Damian Williams said in a video published on the X platform late on Dec. 21, 2022, that Caroline Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTX, had pleaded guilty to defrauding investors in a plea bargain agreement. Bankman-Fried continues to maintain that he didn’t willingly commit wrongdoing.

He was released on a record $250 million bond on Dec. 22, 2022. The 30-year-old former crypto executive was required to live with his Stanford law professor parents in Palo Alto, Calif., confined to the Northern California area, made to wear an electronic monitoring bracelet, and required to submit to mental health and substance abuse counseling as part of the agreement between federal prosecutors and a federal judge in New York.

In August 2023 Judge Lewis Kaplan revoked the defendant’s bail after prosecutors said Bankman-Fried leaked documents about his former girlfriend Caroline Ellison to the New York Times. He was then remanded to federal jail at the Metropolitan Detention Center (MDC) in Brooklyn, NY.

A New York jury found him guilty of fraud and conspiracy to commit fraud in November 2023. On March 28, 2024, he was sentenced to to 25 years in prison, and ordered to pay $11 billion. Before the sentencing, he faced as much as 110 years in prison. Prosecutors argued that a sentencing of 40 years would be appropriate, referring to the case as one of the biggest financial crimes in history. In handing down the sentencing, District Judge Lewis Kaplan said that Bankman-Fried "failed to take responsibility for the disaster he created."

Early Life, Education, and Career

Sam Bankman-Fried was born on March 6, 1992, in California. The son of two professors at Stanford Law School, Bankman-Fried grew up in a highly educated family. He attended high school at Crystal Springs Uplands School in Hillsborough, Calif. He also participated in a summer academic program for gifted high school students in mathematics.

Bankman-Fried graduated from the Massachusetts Institute of Technology (MIT) in 2014 with a degree in physics and a minor in mathematics. In the summer of 2013 he worked as an intern for New York–based Jane Street Capital, where he returned to the proprietary trading firm as a full-time employee after graduating.

Founding of a Cryptocurrency Empire

In 2017 Bankman-Fried left Jane Street and founded Alameda Research, a quantitative trading firm making millions of dollars per day actively trading cryptocurrency among various international markets. He founded the cryptocurrency exchange FTX in April 2019 and launched it the next month.

As the cryptocurrency world burst into prominence during the COVID-19 pandemic, Bankman-Fried and his Bahamas-based company thrived. FTX acquired the Blockfolio exchange and platform in 2020 for $150 million. FTX’s user base expanded, and Bankman-Fried appeared to be on a solid foundation in the otherwise usually turbulent cryptocurrency markets.

During a subsequent wave of crypto failures, Bankman-Fried offered a financial lifeline to cryptocurrency exchange BlockFi, saving it from a major liquidity crisis. (By late November 2022, however, BlockFi also had filed for Chapter 11 bankruptcy.)

Bankman-Fried bought the failed crypto lending platform Voyager and made an offer for the assets of Celsius, which went bankrupt at the same time. He also acquired LedgerX, a derivatives trading platform that was never fully integrated into FTX.

Bankman-Fried told New York Times columnist Andrew Ross Sorkin in an article published on Dec. 1, 2022, that the sum of his wealth was $100,000 in a bank account. That balance represents quite a fall, if true. According to Forbes, Bankman-Fried had an estimated peak net worth of $26.5 billion.

However, much of that value was tied to the value of FTX and its FTT cryptocurrency token. During a long down market for cryptocurrency that followed, Bankman-Fried saw his net worth fall to around $16 billion as of late 2022 in the months and weeks just before his firm’s collapse.

Financial Downfall and Resignation as CEO

Bankman-Fried never let on about any financial challenges or major risk of bankruptcy for FTX through October 2022. On Nov. 2, 2022, a report found that much of the cash held by FTX was in the form of its own token, FTT, which it centrally controls.

In the wake of the news, the CEO of FTX rival Binance announced on Nov. 6, 2022, an intent to sell all FTT holdings. The announcement and sales pushed down the price of FTT and tore through the rest of the cryptocurrency markets.

As a liquidity crisis at FTX became apparent, Binance CEO Changpeng “CZ” Zhao announced a nonbinding letter of intent to buy FTX. After a day of due diligence, however, Binance opted out. Zhao shared that the financial situation was too dire for a cost-effective fix.

At the same time, regulators at the Securities and Exchange Commission (SEC) and the CFTC announced an investigation into Alameda Research and FTX U.S., including allegations that the exchange mishandled customer funds. At that point the financial collapse of FTX became a clear possibility. Bankman-Fried reportedly attempted to raise billions of dollars in an overnight deal to rescue FTX.

The following day about $1 billion to $2 billion in FTX customer funds went missing. FTX said it was investigating “unauthorized transactions” after blockchain watchers spotted hundreds of millions of dollars move out of FTX cryptocurrency wallets.

New York Times Interview With Sorkin and Reaction

In a wide-ranging interview with New York Times columnist Andrew Ross Sorkin at the DealBook Summit on Nov. 30, 2022, Bankman-Fried said that FTX’s collapse stemmed from sloppy accounting and a market crash, not from criminal activity. The former CEO joined the summit virtually from the Bahamas, FTX’s base, and said his participation was against the advice of his lawyers.

During the interview Bankman-Fried generally feigned ignorance of what was going on between FTX and Alameda Research, its trading arm, and said he neither oversaw compliance of the two entities nor appointed an officer to do so. He also mentioned that the company did not put enough attention and resources into risk management. To Sorkin’s question of whether Bankman-Fried commingled funds of FTX and Alameda Research, the former CEO said he didn’t “knowingly” do so.

During an online panel discussion on CoinDesk following the New York Times interview, Lawrence Lewitinn, the editor at large, questioned the veracity of Bankman-Fried’s response and said that commingling of funds is a deliberate act that doesn’t occur by accident. “You have to do work to commingle funds,” Lewitinn said. “You set up accounts when it’s online. You have to have a process to commingle.”

The Bottom Line

The future is likely to be difficult for Bankman-Fried and his investors in FTX, who have lost billions. Both investors and consumers are unlikely to recover the funds lost in FTX’s collapse. All that remains to learn about his legal battle is what his sentencing will be, which is set for March 28, 2024, with a potential of 110 years in prison.

With massive investor and customer losses playing out, FTX and Bankman-Fried likely will be the targets of many future lawsuits and bankruptcy proceedings. The huge losses and allegations of fraud and the cover-up of severe financial troubles could plague Bankman-Fried for years.