Depending on who you ask, Sam Bankman-Fried is either crypto’s “white knight”—or else a mercenary intent on scooping up deals at a time when the latest downturn has many companies on the ropes. Perhaps unsurprisingly, the 30-year-old multibillionaire who runs the massive crypto exchange FTX views himself as the former.
Bankman-Fried, widely known as SBF, admits he first entered crypto to make a lot of money. But in Fortune’s latest cover feature, he says that his overall motive—especially as of late—is also to contribute to the greater good. “I want to be in a position where when we work with people, we’re a little more generous than we have particular reason to be,” he said.
But, what’s his strategy when it comes to who—or what—he invests in, and how does he approach a deal?
“There are a few things that go into it,” SBF said.
Breaking down the crypto kingpin’s investment strategy
When the algorithmic stablecoin Terra imploded in May, it set off a domino effect that hit the industry’s largest players alongside everyday investors. By summer, the industry was reeling from a market crash so bad even Bankman-Fried would “not have guessed” it.
With cryptocurrency investors in trouble—their life savings stuck on platforms without much hope of return—and the industry’s future in question, Bankman-Fried decided to step in. Investing directly, or though FTX or Alameda Research (a trading shop he founded), SBF offered lifelines to a number of battered crypto companies, from broker Voyager Digital to lender BlockFi.
In assessing a prospective investment—or rescue mission—SBF says he first asks himself: “Is there a way for us to backstop customer assets?”
When looking at a “potentially endangered company,” he looks at whether their “endangered” customer assets could be backstopped, he said. “BlockFi is an example where the answer was just ‘Yes.’” But why?
Though BlockFi didn’t have “a ton of capital” on its balance sheet prior to the crash, SBF said, “they were otherwise a pretty healthy business. They had real business dealings with some places that did bust out, but had real risk management in place, and their losses were minimal [post-crash] because of that.”
BlockFi, according to SBF, wanted more capital to act as a buffer for customer assets amid the market downturn, but was otherwise a “healthy business,” he said. That health, for him, determines whether he can backstop or not.
Next, SBF considers whether helping a company would stop “contagion spread… You know, if a place blows up, can it cause more places to blow up? Are we gonna see a chain reaction?” If so, it adds value overall to try and stop that, he explained.
Finally, SBF asks: “Is there a good deal for us here? Or to be precise, is there a ‘not bad’ deal for us here? The mandate here was not to try to make amazing acquisitions. The mandate here was to make deals that are kind of reasonable, maybe even a little bad, but not horrific.”
He adds that, just because FTX has a healthy balance sheet, “We can’t afford it all on dumb shit.”
Though it’s nice to try and help many companies in need, SBF explains that it’s sometimes healthy to let certain projects, well, die. By not doing so, “you’re trying to revive the thing that should not have been there in the first place,” he said.
The “bigger piece of this”—which is something that SBF “underestimated when I first got into business”—is trust between business partners. “Lack of trust is an enormous transaction cost.”
“I don’t want to have to worry when I’m doing a deal about whether the other side is going to try and fuck me in 20 ways I’m not anticipating. Because if that’s true, just doing the deal becomes fucking impossible, right?”
His standard is, simply, “we’re just not going to try and fuck you. We’re going to try and be reasonable. We’re going to try and be generous when we can. Let’s just try to work reasonably together and consider things from what is good for the sum-of-us perspective and then we can think about splitting the pie.”
To learn more about SBF’s views on deal making, as well as his thoughts on the future price of Bitcoin, be sure to check out the full Fortune conversation.
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Read More: Exclusive: How billionaire Sam Bankman-Fried approaches a crypto deal