Sam Bankman-Fried, also known as SBF, went from being a crypto king to a defendant in a courtroom trial. The trial, scheduled to begin on October 3rd, is in relation to fraud charges stemming from the collapse of his bankrupt business in November 2022. How did Bankman-Fried, at the age of 31, fall from such financial success to facing a legal battle for his freedom?
Bankman-Fried grew up in the affluent San Francisco Bay area in California and attended a prestigious school that cost $56,000 a year. Both of his parents were professors at Stanford Law School. He studied at the Massachusetts Institute of Technology (MIT) and lived in a community known as Epsilon Theta, which prided itself on being alcohol-free and focused on activities like board games and puzzles. He admitted to not being engaged in his classes and feeling uncertain about his future during college. Bankman-Fried graduated in 2014 with a major in physics and a minor in math.
Even after graduation, Bankman-Fried upheld the values of Epsilon Theta. He denied claims of drug and alcohol use at FTX, stating that their parties consisted of playing board games with minimal alcohol consumption. He is also known for his vegan lifestyle, which he has maintained in jail despite not being provided with vegan meals. His lawyers claim he has been surviving on bread, water, and peanut butter leading up to his trial. Bankman-Fried’s veganism is linked to his involvement in animal rights activism and the effective altruism movement. He was initially considering a career in animal welfare but was persuaded by Will MacAskill, a leader in the effective altruism movement, to pursue a lucrative career and then donate money to charity. Bankman-Fried initially worked at a quantitative trading firm where he donated around half of his salary to charities, including animal welfare organizations.
Bankman-Fried left his job after three years to pursue more lucrative opportunities and saw crypto as a way to quickly accumulate wealth. His journey began with Bitcoin, where he noticed price discrepancies between Asia and the US. He realized he could 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, a cryptocurrency exchange that allowed users to buy and sell cryptocurrencies. He moved to Hong Kong and later relocated the operation to the Bahamas.
Bankman-Fried lived in a multimillion-dollar penthouse overlooking a famous filming location in the Bahamas. In 2021, Forbes named him the richest twentysomething with a net worth of $22.5 billion. However, his relationship with Caroline Ellison, a fellow effective altruist he met while working at his previous job, was on and off. She joined Alameda Research but eventually became unhappy and overwhelmed at work, as revealed in personal writings. Ellison pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Bankman-Fried was also involved in political donations, being one of the largest individual donors to Joe Biden in the 2020 election cycle. He hoped these donations would drive the passage of legislation favorable to cryptocurrencies.
Bankman-Fried now faces seven charges of fraud and conspiracy related to the collapse of FTX. Prosecutors accuse him of misappropriating billions of dollars from FTX customers for personal expenses, real estate purchases, and political contributions. He has pleaded not guilty but acknowledged risk management failures. The trial is expected to last up to six weeks.