The world of cryptocurrency is known for volatility, with big losses and colossal wins occurring on a regular basis. Even when it comes to founders of large, multibillion-dollar companies, one may not expect losses to be as drastic as they often are. Sam Bankman-Fried, founder of FTX, is potentially going to suffer the largest billionaire wealth wipeout ever, according to Bloomberg. Due to his company’s liquidity crunch, Binance CEO Changpeng Zhao hopes to bail out the company which will likely wipe out all of Bankman-Fried’s monetary wealth in the company. This has also negatively affected the financial trading services company Robinhood, in which FTX holds a large number of shares, with Robinhood dropping 20% in a day. The acquisition has had negative effects on the overall crypto market, with many major tokens dropping well over 10%, with Bitcoin falling below $18,000. More in this article from Bloomberg. – Ross Sinclair
Sam Bankman-Fried’s $16 billion fortune is eviscerated in days
By Tom Maloney
(Bloomberg) — Just weeks ago, Sam Bankman-Fried was considered crypto’s version of John Pierpont Morgan, willing to throw around his massive fortune to save the industry.
The curly-haired 30-year-old known as SBF was everywhere, backing flailing projects including BlockFi, Voyager Digital and Celsius. From the Bahamas, he invested in Robinhood Markets Inc., raising speculation that he’d take over the trading app. And why not? Just last year he said that once his FTX was big enough, it could swallow CME Group Inc. or Goldman Sachs Group Inc.
And he looked poised to leverage his fortune — $26 billion at its peak — to shape the world, donating millions to Democrats and promising that one day he’d give it all away to political causes and charity.
Now, the future of all of it is in doubt.
In the span of days, it became clear that Bankman-Fried and FTX were in the midst of a liquidity crunch and needed a bailout of their own. Changpeng Zhao’s Binance swept in to take over, and, while exact terms weren’t disclosed, it’s likely that SBF’s $15.6 billion fortune will be annihilated at the hands of his billionaire rival.
That might come as a shock to investors including Softbank Vision Fund, Singapore wealth fund Temasek and Ontario Teachers’ Pension Plan, who sunk $400 million into the exchange at a $32 billion valuation in January. But it also put the broader crypto industry on notice: If SBF isn’t safe, who is?
Bankman-Fried’s 53% stake in FTX was worth about $6.2 billion before Tuesday’s takeover, according to the Bloomberg Billionaires Index, based on that fundraising round and the subsequent performance of publicly traded crypto companies.
FTX wasn’t Bankman-Fried’s most valuable asset, though. That was his crypto trading house, Alameda Research, which contributed $7.4 billion to his personal fortune.
The Bloomberg wealth index assumes existing FTX investors, including Bankman-Fried, will be completely wiped out by Binance’s bailout, and that the root of the exchange’s problems stemmed from Alameda. As a result, both FTX and Alameda are given a $1 value.
That leaves SBF’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.
Alameda was founded by Bankman-Fried, formerly a trader at Jane Street, and Gary Wang, an engineer who’d previously worked at Google. They found a niche: arbitraging pricing differences in cryptocurrencies in different countries, and soon expanded into a range of quantitative crypto trading strategies.
It seemed highly profitable. Bloomberg in September reported the firm made about $1 billion in 2021. But questions remained about how FTX and Alameda interacted with each other.
Then Zhao, known as CZ, helped bring about the demise of his chief rival and onetime disciple.
Crypto news site CoinDesk reported on Friday that a token issued by FTX, FTT, made up about a quarter of Alameda’s $14.6 billion in assets. Another item, labeled “FTT collateral,” accounted for $2.16 billion.
Apparently in response to the revelations, Zhao tweeted that his exchange would be liquidating its holdings of FTT. The token’s value has since sunk by about 80%.
CZ now looks poised to add FTX to his own empire. He is already the richest person in crypto, with a fortune estimated at $16.4 billion. His net worth peaked at $97 billion in January, according to the Bloomberg wealth index.
Binance’s acquisition doesn’t involve FTX.US, a separate exchange also majority-owned by Bankman-Fried. FTX.US was valued at $8 billion in a January fundraising round.
It’s unclear exactly what the implosion of its international affiliate will have on the US-based exchange, but it shows “how fragile this world is,” said Paul Gulberg, a Bloomberg Intelligence analyst. It’s “very surprising, scary to some extent.”(Updates with CZ tweet and peak net worth in third-to-last paragraph. An earlier version corrected the name of crypto news site CoinDesk.)
–With assistance from Nur Dayana Mustak.
To contact the author of this story:
Tom Maloney in New York at [email protected]
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