Crypto Billionaire Sam Bankman-Fried Has Nearly Lost His Entire Fortune
This year, anyone playing in the crypto markets has felt the full force of its volatility. It’s been a rough period on the blockchain and many investors are panicked by the sea of downward graphs on their exchange applications. However, we can assure you that no matter how much money you’ve lost in 2022, it won’t compare to Sam Bankman-Fried. The crypto wunderkind’s net worth was USD$15.6 billion (AU$24.2 billion) on Monday night when he went to sleep. By the time he woke the next day, his fortune had plummeted by 94 per cent. Yikes.
One of the wealthiest people on the planet, the 30-year-old known as SBF, is now only worth USD$1 billion (AU1.5 billion). While we won’t lose sleep over where his next meal comes from, the news marks the biggest single-day collapse of a billionaire’s fortune in recent history. Most of SBF’s wealth was linked to the cryptocurrency exchange he founded, FTX (USD$6.2 billion) and quantitative crypto trading platform Alemeda Research (USD$7.4 billion). Today, those numbers are significantly smaller.
Many have speculated for weeks that FTX and Alemeda were in 7 Luxury Cars That Are More Affordable Than You Think trouble. However, it all became real when Coindesk reported Alemeda’s USD$14.6 billion balance sheet was full of FTT token, a coin created by FTX. At the same time, SBF had been in a public spat with Changpeng “CZ” Zhao, the chief executive of giant crypto exchange Binance. Then came the collapse. FTT tokens were trading for USD$62 a year ago – but have collapsed to just over USD$2.
When Alameda’s balance sheet was published, CZ stated his company would be liquidating its US$580 million of FTT tokens it received in a deal last year “due to recent revelations that came to light”. When FTT’s price started to plunge, it did as many expected the disclosure of the incestuous relationships between Alameda, FTX and FTT might do and sent FTT’s prince into a sickening downward spiral and ultimately destroyed the foundations of Bankman-Fried’s entire group, an empire valued by a capital raiser earlier this year at about USD$32 billion.
Then in an announcement that stunned the crypto community, FTX revealed it was suffering “liquidy” issues. SBF reached out to CZ for emergency funding due to recent customer withdrawals, and it looked like the two were on the cusp of a deal. Binance then tentatively agreed to buy FTX but pulled out after a brief due diligence investigation and reports of the US Securities and Exchange Commission looking into the platform’s mishandling of customer funds.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of ,” Binance wrote on Twitter yesterday.
It’s not yet known what the prospective losses are for SBF’s investors – whether holders of FTT tokens or the blue-chip investors in FTX – but it’s been estimated that they could range from USD$6 billion to USD$8 billion. Among those who have backed Bankman-Fried are BlackRock, SoftBank, Ontario teachers’ Pension Plan, Tiger Global, Sequoia and Singapore’s sovereign wealth fund, Temasek.
The future doesn’t look bright for FTX. SBF revealed to investors yesterday that the company needs USD$4 billion to remain solvent and is facing a shortfall of USD$8 billion. The company is urgently seeking financing in the form of debt, equity or a combination of both.