FTX’s spectacular trick: The CEO played League of Legends and ‘scammed’ to raise capital, the Wall Street giant also suffered a loss

Tram Ho

There was a meeting that became a legend in Silicon Valley. When Sam Bankman-Fried met with venture capitalists at Sequoia Capital, the legendary company that has invested in Apple, Google and Instagram, Sam wasn’t there too much to talk about the technology of crypto exchange FTX or about his hedge fund – Alameda Research. What he was talking about was… banana – a yellow fruit.

I want FTX to be a place where you can do whatever you want with your next dollars. You can buy Bitcoins. You can send any currency to any friend anywhere in the world. You can buy a banana. You can do whatever you want with your money on FTX ,” Sam said during the meeting.

It’s exactly the kind of big idea that Silicon Valley loves, but it’s not what drives investors crazy. Ramnik Arora, FTX’s former product manager, later revealed to venture capitalists: ” It turns out that guy (referring to Sam) was playing League of Legends for the entire meeting .”

Now, the game is over for Bankman-Fried. Just a few weeks ago, he was one of the richest men in the world, the face of what many in Washington and on Wall Street think is the future of the economy: A person who can unlock potential power of digital currency.

Yet in less than a week, it all came crashing down, with suspicions of fraud and Sam’s admission of misappropriating money from his own customers leaving the FTX empire in disarray.

Cú lừa ngoạn mục của FTX: CEO vừa chơi Liên minh huyền thoại vừa 'chém gió' gọi vốn, quỹ sừng sỏ phố Wall cũng chịu cảnh mất trắng - Ảnh 1.

On Friday, FTX and his hedge fund, Alameda Research, filed for bankruptcy and Sam also stepped down as CEO of the exchange. Government officials in the Bahamas, where Sam’s companies are based, seized their remaining assets. Investigators are said to be investigating Sam’s company, and him personally, to find out what happened.

Now, Sequoia, like other venture capital funds that have poured money into the company, has actively reduced the value of its shares to zero.

Now, like his companies, Bankman-Fried’s dark and complicated life is being unraveled. According to reports, he was romantically linked to ten other roommates in the Bahamas, who appear to not only be romantically involved with each other, but also run his empire de facto.

In addition, information from the NYMag reported that the entire team behind Sam’s charity had quit. It should be recalled that Bankman-Fried made headlines earlier this year when he pledged to give away his huge fortune.

The demise of Bankman-Fried and his crypto empire marks the beginning of the worst year in 13 years of crypto existence. For anyone paying attention, this situation seems inevitable.

Last November, when the cryptocurrency market peaked with a market capitalization of more than $3 trillion globally, staunch believers in the transformative power of cryptocurrencies said that the bubble was about to burst and they were just waiting. waiting for a force to come and end the wildest party of their lives.

In 2022, it all happened. Just a few months ago, $60 billion was wiped out of the industry when Do Kwon and cryptocurrency company Terraform Labs collapsed. Do Kwon is now missing and South Korean prosecutors believe he is hiding somewhere in Europe. Since that explosion, things have gotten worse, leading to a series of “cryptocurrency banks” going bankrupt.

Bankman-Fried is said to be the antidote. After the collapse of Do Kwon and the Three Arrows earlier this year, Bankman-Fried jumped in to save crypto banks Voyager and Celsius and lent $400 million to save another exchange called BlockFi. At that time, Fortune also had a cover article calling Sam “the next Warren Buffett”, comparing the young billionaire’s strategy to that of the chairman of Berkshire Hathaway.

While FTX is positioned as a platform to trade cryptocurrencies securely and quickly – what is not known about the exchange is that it has a secret funding relationship with Bankman’s other main business- Fried, hedge fund Alameda.

As a way to finance FTX operations, the company has issued its own digital currency called FTT – similar to what a traditional company would do by selling stocks or bonds. All of that came crashing down spectacularly starting this month when CoinDesk announced several internal Alameda assets showing Alameda as the largest FTT holder to date.

One person who paid particular attention to Alameda’s leaked balance sheet was Changpeng Zhou, the owner of cryptocurrency exchange Binance. Known as CZ, he was an early investor in FTX but withdrew last year in exchange for about $2 billion in crypto — including around $500 million in FTT.

Following CoinDesk’s story, CZ announced that he will be selling Binance’s FTT holdings. That weekend, Bankman-Fried said, about $5 billion was sucked out of FTX due to panic. Depositor has withdrawn. With the value of FTT tokens in free fall, they couldn’t sell enough of their FTT tokens to give it back to everyone. According to Bankman-Fried’s own tweets, the money backing those tokens was originally customer deposits.

It is not clear what will happen to FTX or those with funds trapped on the platform. But the consequences could be even more profound than the Terra explosion earlier this year.

Bankman-Fried has repeatedly apologized on Twitter but he hasn’t really delivered a convincing story of how quickly it all came crashing down, even though what came out was terrible.

Source: New York Mag

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