There comes a point in the development of a new technology when hype is so common that it passes for common sense. Lawyers, accountants and regulators are nowhere to be found. Investors insist that entrepreneurs take their money. The world trembles as change approaches.
For dot-com companies, it was 1999. For artificial intelligence, it was a little over nine months ago. For cryptocurrencies, it was in 2017.
Six years ago, Sam Bankman-Fried knew little about alternative currencies. But he rightly bet that there were huge opportunities to capture a tiny portion of the millions of crypto transactions. In the blink of an eye, he was touted as being worth $23 billion. Only Mark Zuckerberg had accumulated so much wealth so young.
The Facebook co-founder has his critics, but he looks like Thomas Edison next to Mr. Bankman-Fried. After a quick trial in Manhattan federal court, the former crypto king, now 31, was found guilty Thursday of seven counts of fraud and conspiracy involving his companies FTX and Alameda Research .
Mr. Bankman-Fried once partied with stars and bigwigs, took fortunes in looted funds from politicians and himself, was acclaimed as the next Warren Buffett, He employed his friends and enriched them for a time, he was courted by the media who published his most banal comments. For a while, everyone loved Sam Bankman-Fried – with the apparent exception of Sam Bankman-Fried.
“I am, and have been for most of my adult life, sad.” The plaintive statement appears at the end of testimony Mr. Bankman-Fried hoped to give to Congress last winter before his arrest derailed his plans. He was right.
In photos from his heyday, Mr. Bankman-Fried still looked awkward, embarrassed and as if he would rather be playing a video game, even when Gisele Bündchen had an arm around him. Everyone insisted that he was an extraordinary genius, the entrepreneur who would create the future. Maybe he knew better.
As journalists – and now prosecutors – have made clear, FTX and Alameda were run by a group of hapless young people who lacked the required skills, maturity or patience. Those who actually had a moral compass and sensed something was wrong quickly withdrew, leaving a core team that drifted – or perhaps plunged – into trouble.
“When I started working at Alameda, I don’t think I would have believed you if you told me I would send fake balance sheets to our lenders or accept money from customers, but over the “Over time, it’s something I’ve become more comfortable with,” Caroline Ellison, a colleague and sometime girlfriend of Mr. Bankman-Fried, testified at the trial.
When Ms. Ellison started working at Alameda, something called blockchain was going to transform everything, one way or another. Silicon Valley has invested billions in crypto, looking for those like Mr. Bankman-Fried who got there early and seemed smart.
Sequoia Capital, a large venture capital firm that has funded Apple, Airbnb, Instagram and WhatsApp, practically begged Mr. Bankman-Fried to take his money during the mad rush when crypto was shiny and new. The founder of FTX did it. Sequoia then commissioned a very long celebration of Mr. Bankman-Fried from Adam Fisher, a longtime Silicon Valley writer who fell in love with the man his fans called him SBF.
“After my interview with SBF, I was convinced: I was talking to a future billionaire,” Mr. Fisher wrote. He added: “FTX’s competitive advantage? “Ethical behavior.”
Less than two months after the interview was published, FTX collapsed. Sequoia put a note at the top of the story saying it was an “unexpected turn of events.” He later retracted the story and canceled his $214 million investment in the exchange. Sequoia and Mr. Fisher declined to comment.
The central myth of Silicon Valley is that technicians are here to save the world. If they become incredibly rich in the process, well, that only proves how great their idea was to begin with.
It was the call of Elizabeth Holmes and her blood testing company, Theranos. She was young, feminine and attractive, who looked good on magazine covers. But what really propelled her to fame and fortune was that she was a sort of high-tech Florence Nightingale, working through the night to perfect medical technology that could improve people’s health. (The truth was that its technology didn’t work and put customers at risk by giving them unreliable results.)
FTX allowed people to bet on cryptocurrencies. It was basically a casino. It is difficult for even the most sympathetic journalist to portray a casino as a savior of humanity, which is why reporting has always focused on Mr. Bankman-Fried himself.
He calculated all the chances of success: he thought there was a 5% chance that he would become president of the United States. He believed he would help humanity by making a fortune and then giving it away, a philosophy known as effective altruism. The details didn’t matter. Ace to flatter Forbes Profile said it in 2021: “He’s a mercenary, determined to make as much money as possible (he doesn’t really care how) just so he can give it away (he doesn’t really know to whom or when). »
During the trial it emerged that Mr Bankman-Fried had spent $15 million on private plane trips. He never did much to hide the fact that he was living with some of his FTX friends in a $35 million penthouse. The question of whether these young people should be sleeping on the beach instead of living the high life if they truly followed the doctrine of effective altruism never seemed to arise.
Mr. Bankman-Fried was happiest when he played video games, which he did as often as he could. Even as he spoke to Sequoia via Zoom about his grand plans to create a financial super-app within FTX and thus wipe out every bank in the world, he was playing League of Legends.
Time and again, he expressed disdain for what he was doing and appeared to implore authorities to take a closer look at his businesses. Take for example this statement I did it in August 2021 in one of his many interviews: “If there’s something we’re doing that a regulator doesn’t want, you don’t have to sue us. “Contact us and tell us what you want.”
The magic of starting a business when a boom is starting is that the bar is low. When Sequoia was looking for a crypto exchange to invest in, FTX was “Perfect Goldilocks”. according to his profile. One of the main reasons: “There has been no concerted effort to circumvent the law. » It’s hard to find a bar much lower than that.
Mr. Bankman-Fried tried to warn everyone.
“In terms of the number of Ponzi schemes, there are way more in crypto, sort of per capita, than in other places.” he told the Financial Times in May 2022.
It didn’t matter. Investors, customers, journalists all saw the genius they were told was there. And if they had any doubt, Mr. Bankman-Fried had an advantage: his parents were law professors at Stanford.
“He has two parents who are business lawyers,” said the Kevin O’Leary, star of ‘Shark Tank’, who was both a promotional spokesperson for and an investor in FTX. “If there’s anywhere I can be and I’m not going to get in trouble, it’s going to be at FTX.”
Mr. O’Leary may not have known that Joseph Bankman, a tax law specialist and clinical psychologist, and Barbara Fried, a professor emeritus at Stanford Law School, had their attention elsewhere. According to a complaint filed by the bankrupt company FTX, their son gave them, through FTX, a $16 million house in the Bahamas, $10 million in cash and many other things. The couple’s lawyers called the claims “completely false.”
In this glowing profile of Sequoia, Mr. Bankman-Fried said: “I am very skeptical of books. “I don’t want to say that no book is worth reading, but I actually believe in something pretty close.” He didn’t like movies either.
It is impossible to read the sad saga of Mr. Bankman-Fried without thinking that he and many of those around him would have been better off if they had spent less time at math camp and more time in math class. English. Sometimes in books, characters find their moral compass; in the best books, so does the reader.
As I read about Mr. Bankman-Fried, the historical drama “A Man for All Seasons,” once a high school staple, came to mind. It’s about a man who knows right from wrong and a man who doesn’t. Richard Rich is a bit like Mr. Bankman-Fried: a young man with big ambitions and no scruples. He begged Thomas More to grant him a place at court. More told Rich he would be a good teacher.
Who would know if I was a good teacher? » Rich asks contemptuously.
“You, your students, your friends, God” More answers. “Not a bad crowd, that.”
Rich rejects the quiet life, betrays More and is rewarded with a post in Wales. The viewers are made to understand that he is losing his soul. Mr Bankman-Fried rejected the quiet life, betrayed almost everyone he knew – and found himself without wealth or Wales.
