Welcome to the Blocks by Mr. Block educational newsletter covering the topic of SBF and FTX.
Sam Bankman-Fried (abbreviated SBF) is a former billionaire and entrepreneur from the United States. He was born on the Stanford University campus on March 6, 1992, into a Jewish family. He graduated from the Massachusetts Institute of Technology (MIT) in 2014 with a degree in physics and a minor in mathematics after attending Crystal Springs Uplands School in Hillsborough.
SBF interned at Jane Street Capital, a proprietary trading firm that trades foreign ETFs, in 2013. After graduating from MIT, he returned to work there full-time. He left Jane Street in 2017 to start Alameda Research, a quantitative trading firm that makes millions of dollars each day actively trading cryptocurrencies between several international exchanges.
The net wealth of Bankman-Fried peaked at $26 billion. He had an estimated net worth of $10.5 billion in October 2022, however this plummeted to an estimated $0 with the collapse of FTX in November 2022.
FTX was a cryptocurrency exchange created in 2019 by CEO Sam Bankman-Fried. With a market capitalization of $32 billion, it swiftly became one of the world's largest exchanges.
FTX's demise was prompted by a rise in customer withdrawals earlier in the month, which left the company with insufficient funds to support them. As a result, FTX filed for bankruptcy on November 11, 2022. Ray, who had previously led energy trading major Enron through bankruptcy procedures, took over as CEO after Bankman-Fried stepped down.
Major venture capital firms had invested over $2 billion in FTX, and Bankman-Fried had become the company's and crypto's public face. However, it was then uncovered that FTX and its sibling companies allegedly did not follow regular financial reporting processes, resulting in the removal of $400 million from FTX accounts without explanation. Furthermore, Binance reneged on a contract to salvage the company, resulting in the company's bankruptcy filing on Thursday.
The balance statement for FTX substantially exaggerated its assets, with a $8 billion "poorly marked" account shown as a negative amount of cash on an Excel balance sheet. The greatest asset was $2.187 billion in coins in Serum, a cryptocurrency trading exchange founded and supported by FTX and Alameda Research. This asset was appraised at $5.4 billion in October, but it subsequently lost value due to mismanagement and a lack of financial reporting processes. This eventually contributed to FTX's demise.
Bankman-Fried was detained in the Bahamas on December 12th, 2022, in connection with several criminal fraud accusations brought by the United States Attorney for the Southern District of New York. He agreed to waive his extradition rights on December 21st and was flown from the Bahamas to a Westchester County airfield outside of Manhattan.
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