Sam Bankman-Fried’s Power Was Contingent on Belief

On Sept. 16, CNBC’s “Squawk Box” aired a segment about Sam Bankman-Fried — the chief executive, at the time, of the cryptocurrency exchange FTX — and his recent spree of acquisitions in the wake of an industry downturn. “They call him the J.P. Morgan of crypto, right?” the host asked, comparing Bankman-Fried to a financier with so much money he backstopped myriad failing banks in order to stabilize the entire financial sector. “The White Knight of Crypto,” read the text at the bottom of the screen.

Over a shot of Bankman-Fried trotting through a parking lot in the Bahamas, a reporter repeated facts I have come to think of as the Precrash Litany of Sam Bankman-Fried: He’s a multibillionaire at 30, he drives a Toyota Corolla, he lives in the Bahamas with nine roommates and a goldendoodle. He has gotten richer, faster, than almost anyone in history, having started his best-known company in 2019. In an interview, he perched on a stool and talked about the moves that drew the Morgan comparison: self-sacrificing investments his firm made in the interest of saving, in his words, the larger crypto “ecosystem.”

Two months later, the “White Knight” narrative was tossed in the office trash can and lit on fire. The crypto publication CoinDesk had reported on documents that shook people’s faith in Bankman-Fried’s companies, and soon most everyone apart from the goldendoodle — investors, customers, employees — rushed for the doors. In a snap, Bankman-Fried was deposed as chief executive, and FTX filed for bankruptcy. The Nov. 11 edition of “Squawk Box” featured Anthony Scaramucci, whose SkyBridge Capital sold a 30 percent stake of its fund to Bankman-Fried around the time of those “White Knight” bailouts. “I don’t want to call it fraud at this moment, because that’s actually a legal term,” he said. But you sensed that he very much did want to call it fraud, the legal word.

The rapidity of this shift, especially in financial media, was enough to give a casual observer whiplash. In 2021, Forbes featured Bankman-Fried on its cover for its list of the 400 richest Americans, with a buoyant profile inside focused on the youthful billionaire’s promises to donate his expanding wealth. Switch to this past fall, and the magazine posted a video titled “‘Devil in Nerd’s Clothes’: How Sam Bankman-Fried Fooled Everyone.”

Article source: https://www.nytimes.com/2022/12/28/magazine/sam-bankman-fried-ftx.html