FTX CEO Sam Bankman-Fried spent the last year on a victory tour. “crypto token” was held in court at BloombergCrypto Summit in the summer and was crowned a mega donor savior for the Democrats in the midterm elections. His club even cheered for him to play League of Legends in high-level meetings with investors who went on to pour hundreds of millions into his growing crypto-exchange empire. Now, within just a week, everything has come crashing down.
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It started on November 2, when Coindesk reported that Bankman-Fried’s trading firm Almeda Research held $14.6 billion in FTT coins, tokens created by his crypto exchange FTX. This was considered very bad for a number of reasons, including the fact that it’s never a good sign when one company owns $14.6 billion worth of a single token. At its peak, each token was worth more than $70. Now they are trading at less than $4, a loss of almost 95%, depending on when the tokens were bought.
Binance, the world’s largest crypto exchange and FTX’s main competitor, tweeted about how this didn’t look good, which then triggered a sort of “run on the bank” as people tried to get their money out of FTX. The value of the token crashed. Binance offered to buy FTX. Then it looked at FTX’s books and said no thanks. Now FTX, which was valued at $32 billion just a few months ago, is orbiting in a vacuum investigations by regulatory authorities, possible lawsuitsand spectacular bankruptcy.
At the center of all this, however, is Bankman-Fried. Has been in every way crypto scams, but the whole point of FTX was that it had to be legit, partly because it was run by a really smart guy. Does this encryption crap make no sense to you? Do not worry, This guy has figured it out and he is making you and him billions with his really smart ideas about finance and crypto. And he’s going to do it ethically. “30-year-old crypto billionaire wants to give his fortune away,” it reads one Bloomberg title. “Sam Bankman-Fried drives a Corolla, sleeps in a sack and has a philosophy like Robin Hood.”
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And many people were convinced. Even if you don’t think you’ve ever heard of FTX or Bankman-Fried, chances are you’ve seen a rough one $25 million ad both featuring Larry David at this year’s Super Bowl. The man poured $40 million into the 2022 midterms to highlight their importance pandemic preparedness. The Stonk memelords were absolutely convinced that GameStop’s NFT partnership with FTX was going to help take an ailing video game retailer to the moon.
Bankman-Fried was so smart, in fact, that he was able to tell some of the world’s biggest investors why they should give him their money all the time in the middle League of Legends team fight. By Bankman-Fried September Profile, he did just that when, on a Zoom call with venture capital firm Sequoia, he tried to raise additional funding for FTX by talking about how the crypto exchange would become a “super app.” Here is an excerpt:
That’s when SBF told Sequoia about the so-called super app: “I want FTX to be a place where you can do whatever you want with your next dollar. You can buy bitcoins. You can send money in any currency to any friend anywhere in the world. You can buy a banana. You can do whatever you want with your money FTX within.”
Suddenly the chat window on Sequoia’s side in Zoom lights up and the partners are confused.
“I love THIS FOUNDER,” one partner wrote.
“I’m 10/10,” pinged another.
“YEAH!!!” exclaimed the third.
Sequoia responds to the scale of SBF’s vision. It wasn’t a story about how we might use fintech in the future, crypto or a new kind of bank. It was a vision of the future of money – with a comprehensive addressable market for every person on the planet.
“I was sitting ten meters away from him and I walked by and thought, ‘Oh shit, that was really good,'” Arora recalls. “And it turns out that bastard was playing League of Legends the entire meeting.” “We were incredibly impressed,” says Bailhe. “It was one of those ‘hair on fire’ type of meetings.
Not only that, says Arora, but League of Legends is a multiplayer online battle arena video game where, roughly every four minutes, tactical maneuvering is interspersed with ten seconds of action known as a gank – gamer slang for “gang kill” – in which you and your team team up to attack the enemy. “There’s basically a fight,” says Arora, who was watching over SBF’s shoulder as he answered Sequoia’s last question, “and I’m like, This guy is screwing up!”
After the meeting, Sequoia ended up investing more than $200 million in FTX. But really they invested in Bankman-Fried Magic: The Gathering nerd and a financial enthusiast who was going to supply them with one app to manage them right after he pubbed some rands (FTX is also $210 million sponsor from the professional league team TSM). Yesterday, Sequoia reset the entire investment to worthless.
“I don’t know how I know, I just know,” Adam Fisher, author of the excerpt above, wrote in his glowing September profile. “[Sam Bankman-Fried] is the winner.”
“Published 6 weeks ago,” a commenter quoted this section answered online. “Aged well, didn’t he?”
Fisher wrote back: “It’s cool in hindsight. I’m not quitting my day job to become a tech investor, I’ll tell you that.”
But Fisher is just a freelancer. Who paid for the profile? Why, Sequoia of course. You can read “Sam Bankman-Fried has a savior complex—and maybe you should, too” on their website, but with a new editor’s note.
“We have risk taking,” reads part a letter update partners. “When investing in FTX, we performed strict due diligence processes.”
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