Sam Bankman-Fried, also known as SBF, has gone from being a crypto king to a defendant in a courtroom. The trial of the founder of the FTX cryptocurrency exchange is set to begin on Tuesday, October 3rd. He is facing fraud charges related to the collapse of his bankrupt business in November 2022, charges that he denies. But how did this 31-year-old go from incredible financial success to facing a legal battle for his freedom?
Bankman-Fried grew up in the wealthy San Francisco Bay area of California, where he attended an expensive school that cost $56,000 a year. Both of his parents were professors at Stanford Law School. He went on to study at the Massachusetts Institute of Technology (MIT), where he lived in a group house called Epsilon Theta. This community was known for being alcohol-free and enjoying activities such as playing board games, solving puzzles, and having rubber ducks. Bankman-Fried admitted that he didn’t apply himself in classes and was unsure of what he wanted to do with his life for most of college. In 2014, he graduated with a major in physics and a minor in mathematics.
Bankman-Fried has maintained the values of Epsilon Theta even after graduation. He has denied claims of drug and alcohol use at FTX, stating that there were no wild parties at the company. He described their parties as playing board games, with only about 20% of people having a small amount of alcohol. He is also known for being a vegan and has stuck to his principles even in jail, where he claims he has not been provided with vegan meals. Bankman-Fried’s veganism is connected to his involvement in animal rights activism and the effective altruism movement. While in college, he considered a career in animal welfare and organized a protest against factory farming. However, he was convinced by one of the leaders of the effective altruism movement that he could make a greater impact by pursuing a well-paying career and then donating money to charity. Bankman-Fried followed this approach and donated about half of his salary to various charities, including those focused on animal welfare.
After working at Jane Street, a quantitative trading firm, for three years, Bankman-Fried decided to take more risks to make more money. He turned to crypto, starting with Bitcoin. He discovered that Bitcoin was being sold for more in Asia than in the US and saw an opportunity to make a profit by buying in one place and selling in another. In 2017, he co-founded the cryptocurrency trading firm Alameda Research, which donated half of its profits to charity. The company reached its peak by moving $25 million in Bitcoin daily. Two years later, Bankman-Fried founded FTX, an exchange that allowed users to buy and sell cryptocurrencies. He moved to Hong Kong and later to the Bahamas, where he bought a luxurious waterfront penthouse.
Bankman-Fried had a relationship with Caroline Ellison, whom he met while working at Jane Street. She joined Alameda Research, attracted by the idea of earning money to donate to charity. The couple lived together in Bankman-Fried’s Bahamas penthouse. However, Ellison eventually became unhappy at Alameda, and in her personal writings, she expressed feeling overwhelmed and hurt by her breakup with Bankman-Fried. Bankman-Fried was jailed for allegedly sharing these writings with a reporter, with a judge considering it witness tampering.
Bankman-Fried was a major donor to Joe Biden in the 2020 election cycle and made significant contributions to Democratic candidates and causes before the 2022 midterm elections. Prosecutors claim that he used $100 million in stolen FTX deposits to fund these political donations, hoping to influence the passage of crypto-friendly legislation. While the charge of conspiring to break US campaign finance laws was dropped after The Bahamas refused to extradite him, the judge has allowed the political donations to be discussed at the trial, as they are intertwined with the fraud charges.
Bankman-Fried is facing seven charges of fraud and conspiracy related to the collapse of FTX. Prosecutors allege that he looted billions of dollars from FTX customers to cover losses at Alameda, purchase luxury real estate, and make political donations. He has pleaded not guilty to the charges but acknowledges failures in risk management. The trial in Manhattan is expected to last up to six weeks.