FTX founder Sam Bankman-Fried‘s trial begins on Tuesday. The former cryptocurrency superstar is facing federal fraud charges, and a book detailing the alleged fraudster’s rise and fall is set to be published the same day.
Best-selling author Michael Lewis had all-hours access to Bankman-Fried and met him more than 100 times over two years. Lewis details how Bankman-Fried’s empire crumbled in “Going Infinite,” but he leaves it to readers to decide if Bankman-Fried was a cryptocurrency con man, or a really smart guy incapable of running and managing a business.
The rise of crypto superstar Sam Bankman-Fried and FTX
Bankman-Fried, once considered by some to be the J.P. Morgan of crypto, worked as a Wall Street trader before moving to Berkeley at 25 to start his own trading firm, Alameda Research. Instead of stocks and bonds, he dealt in crypto, a digital form of currency not tied to a centralized system. Bankman-Fried made a fortune and seized on the idea of opening his own cryptocurrency exchange: FTX.
“It’s owning the casino,” Lewis said. “He started as a gambler and he realized that, you know, building the better casino was actually going to be more valuable.”
Soon, roughly $15 billion a day in trades were executed on FTX, and Bankman-Fried was worth more than $20 billion before the age of 30. Lewis says he didn’t know anything about the crypto wunderkind when a friend called asking Lewis to meet with Bankman-Fried.
“All I knew was I was supposed to evaluate his character. And that 18 months earlier, he had nothing. Now he had $22.5 billion and was the richest person in the world under 30,” Lewis told 60 Minutes.
60 Minutes
When they first met, Lewis says he learned that Bankman-Fried didn’t care much about the trappings of wealth; he was committed to making as much money as possible so that he could give it away as efficiently as possible, all in the service of a social movement: effective altruism.
Bankman-Fried set out to confront what he saw as existential threats to humanity: AI running amok, the threat of a future pandemic and something even more unusual: Donald Trump. According to Lewis, Bankman-Fried felt the former president was undermining democracy. Bankman-Fried, who donated lavishly to political campaigns, looked into paying Trump not to run for president in 2024. Lewis writes in “Going Infinite” that Bankman-Fried’s team had even gotten a number from someone inside the Trump operation: $5 billion.
“They were still having these conversations when FTX blew up,” Lewis said. “So why didn’t it happen? He didn’t have $5 billion anymore.”
The downfall of Sam Bankman-Fried and FTX
By the spring of 2022, FTX had taken root in the Bahamas. Bankman-Fried moved the company not for the beaches, but for the friendly regulatory climate. The company had cleared a swath of land for a new corporate headquarters, but all was not well.
Lewis noted that Bankman-Fried avoided hiring “grownups” at FTX and felt that anyone over the age of 45 was useless, but that if ever there were a corporate leader in need of adult input to manage 400 employees, it was Bankman-Fried. The author explained that even Bankman-Fried’s closest colleagues thought he was a horrible manager.
“His sole experience of leadership was running puzzle hunts for math nerds out of high school,” Lewis said. “And actually thought deep down, if you asked him, people shouldn’t need to be managed. So he proceeded to act on that and basically didn’t manage them.”
There was no chief financial officer, no human resources department and no compliance officer.
“It was all Sam’s world and there was nobody there to say, like, ‘don’t, don’t do that,'” Lewis told 60 Minutes correspondent Jon Wertheim.
60 Minutes
To run his privately held trading firm, Alameda Research, Bankman-Fried installed a former Wall Street trader, Caroline Ellison, who also became his girlfriend. But the pair broke up and were not communicating in the months before FTX collapsed.
The rupture occurred at precisely the same time crypto prices collapsed in the summer of 2022.
Though Bankman-Fried owned the FTX exchange, he was also trading crypto on FTX through Alameda Research.
“He was gambling in his own casino, and it created conflicts of interest,” Lewis said.
Then came a one-two punch: a leak of Alameda Research’s unflattering balance sheet in early November, and days later, Changpeng Zhao, the head of a rival exchange, questioned FTX’s viability on Twitter. The effect: a panic run on FTX.
“It unravels because the depositors at FTX want their money back and it’s not all there,” Lewis explained.
In large part, the money wasn’t there because investors’ funds intended for FTX wound up in Bankman-Fried’s Alameda Research to the tune of more than $8 billion.
Bankman-Fried lost virtually everything over a matter of days last November.
Lewis told 60 Minutes he does not believe Bankman-Fried knowingly stole customers’ money, and explained that in the early days of FTX, the company couldn’t get a bank account, so customer funds were sent to Alameda Research, which could get a bank account. Those funds were never transferred over to FTX.
60 Minutes
Lewis asked Bankman-Fried how he could not know that $8 billion of investors’ money was in Alameda Research instead of on FTX. Lewis told 60 Minutes that Bankman-Fried said: “”You have to understand that when it went in there, it was a rounding error. That it felt like we had infinity dollars in there and that I wasn’t even thinking about it.'”
John J. Ray III, who stepped in to lead FTX after it filed for bankruptcy in November, previously said the company collapsed because of “grossly inexperienced” leadership.
Sam Bankman-Fried’s arrest and the charges he faces
Lewis returned to the Bahamas to see Bankman-Fried as his crypto empire collapsed. A month later, Bankman-Fried was arrested and extradited to New York to face federal charges that he had fraudulently used customer deposits to finance billions of dollars in venture capital investments, real estate purchases and political donations.
Bankman-Fried was indicted on and pleaded not guilty to seven charges, including wire fraud and conspiracy to commit wire fraud against lenders and customers, conspiracy to commit securities fraud and conspiracy to commit money laundering.
Bankman-Fried was released on bail not long after his arrest. He wore an ankle monitor and was living in his childhood home in northern California with his parents, who have also been ensnared in legal proceedings tied to FTX. Lewis would drive there to meet with Bankman-Fried so they could continue their conversations. The judge in the case later instituted a gag order and put Bankman-Fried in jail in New York City for violating terms of his release.
What’s next for Sam Bankman-Fried
Bankman-Fried’s trial opens on Tuesday.
“He genuinely thinks he’s innocent,” Lewis said. “I can tell you his state of mind four or five months ago. He’s like, ‘if you offered me plead guilty and do six months of house arrest, I’d still say no.'”
Bankman-Fried faces a potential combined sentence of more than 100 years if he’s convicted, but Lewis suspects Bankman-Fried’s biggest fear if he has to go to prison is not having access to the internet.
“Now that sounds crazy, but I do think that if he had the internet, he could survive jail forever,” Lewis said. “Without having a constant stream of information to react to, I think he may go mad. If you gave Sam Bankman-Fried a choice of living in a $39 million penthouse in the Bahamas without the internet, or the Metropolitan Detention Center in Brooklyn with the internet, there’s no question in my mind he’d take the jail.”
Reported by Jon Wertheim, Draggan Mihailovich and Emily Cameron
