Everyone in FTX’s orbit has suffered financially, but the real wound cuts deeper. Sam Bankman-Fried has let down supporters, embarrassed investors and made fools of politicians and regulators
Save time by listening to our audio articles as you multitaskIn other words, they are places that now reek of despair—not just about the billions of dollars that are trapped on a defunct exchange, but about the architect of the mess. Mr Bankman-Fried was crypto’s golden boy. He studied physics at the Massachusetts Institute of Technology and was supposed to have learned the craft of marketmaking and trading at Jane Street, an elite financial firm.
Astute readers may notice this is not how an exchange should work. Normal ones hold customer deposits, not a mix of venture investments and tokens. Then there is an apparent hole in the accounts. In a grovelling note left in them seemingly by Mr Bankman-Fried, the writer claims not to have realised $8bn was missing, an amount worth more than half that deposited in the firm’s care. This is put down to a “poorly labelled” internal account.
The only way out would have been to bet big or raise money. According to reports, Mr Bankman-Fried has been trying to raise capital since the summer. He flew to Abu Dhabi two weeks ago in an apparent attempt to drum up interest. When his problems became acute, he called Sequoia and other early investors. He even tried Binance, owned by his great rival, Mr Zhao.
It is this kind of public theorising that has made some even more suspicious. Regulators and law-enforcement agencies, including the Department of Justice and the Securities and Exchange Commission are investigating, along with authorities in the Bahamas. Mr Bankman-Fried may be flown to America for questioning; Congress plans to force him to testify in December about what went wrong. In crypto-forums, thousands of conspiracy theories are being traded.
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