FTX CEO Sam Bankman-Fried spent the last year on a victory tour. The “crypto kingpin” held court at Bloomberg’s Crypto Summit over the summer and was crowned as a mega donor savior to Democrats in the midterm elections. His company even gloated about him playing League of Legends during high-level meetings with investors who would go on to pour hundreds of millions into his burgeoning crypto exchange empire. Now, in the span of just one week, it’s all come crashing down.
It started on November 2 when Coindesk reported that Bankman-Fried’s trading firm, Almeda Research, held $14.6 billion in FTT coin, a token created by crypto exchange, FTX. This was considered to be very bad for a number of reasons, including that it’s never a good sign when $14.6 billion worth of one token is held by one company. At its height, each token was worth over $70. Now they are currently trading for less than $4, a loss of nearly 95 percent, depending on when the tokens were bought.
Binance, the biggest crypto exchange in the world and FTX’s main rival, tweeted about how this didn’t look good, which then triggered a “run on the bank” of sorts with people trying to pull their money out of FTX. The value of the token crashed. Binance offered to buy FTX. It then took a look at FTX’s books and said no thank you. Now FTX, valued at $32 billion just a few months ago, is circling the drain of regulator investigations, potential lawsuits, and seeming bankruptcy.
At the center of all this, though, is Bankman-Fried. There have been all manner of crypto scams, but the whole point of FTX was that it was supposed to be legit, in part because it was run by a really smart guy. None of this crypto shit makes any sense to you? Don’t worry, this guy has figured it out, and he’s going to make you and him billions with his really smart ideas about finance and crypto. And he’s going to do it ethically. “A 30-Year-Old Crypto Billionaire Wants to Give His Fortune Away,” reads one Bloomberg headline. “Sam Bankman-Fried drives a Corolla, sleeps on a beanbag, and has a Robin Hood-like philosophy.”
And a lot of people were convinced. Even if you don’t think you’ve ever heard of FTX or Bankman-Fried, you probably saw the roughly $25 million commercial for both featuring Larry David at this year’s Super Bowl. The man poured $40 million into the 2022 midterm races to push the importance of pandemic preparedness. Stonk memelords were absolutely convinced that GameStop’s NFT partnership with FTX was going to help take the ailing video game retailer to the moon.
Bankman-Fried was so smart, in fact, that he could pitch some of the biggest investors in the world on why they should give him their money all while in the middle of a League of Legends teamfight. According to a September profile of Bankman-Fried, he was doing just that while in a Zoom call with venture capital firm Sequoia trying to secure additional funding for FTX by talking about how the crypto exchange would become a “super app.” Here is an excerpt:
That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”
Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.
“I LOVE THIS FOUNDER,” typed one partner.
“I am a 10 out of 10,” pinged another.
“YES!!!” exclaimed a third.
What Sequoia was reacting to was the scale of SBF’s vision. It wasn’t a story about how we might use fintech in the future, or crypto, or a new kind of bank. It was a vision about the future of money itself—with a total addressable market of every person on the entire planet.
“I sit ten feet from him, and I walked over, thinking, Oh, shit, that was really good,” remembers Arora. “And it turns out that that fucker was playing League of Legends through the entire meeting.” “We were incredibly impressed,” Bailhe says. “It was one of those your-hair-is-blown-back type of meetings.”
Not only that, Arora says, but League of Legends is the kind of multiplayer online battle arena video game where every four minutes or so of tactical maneuvering is punctuated by ten seconds of action known as a gank—gamer slang for “gang killing”—where you and your team gang up on an enemy. “There’s a fight that happens, basically,” says Arora, who was watching over SBF’s shoulder as he answered that final question from Sequoia, “and I’m like, This guy is fucking in a gank!”
After that meeting, Sequoia ended up investing over $200 million in FTX. But really they were investing in Bankman-Fried, the Magic: The Gathering nerd and finance whiz who was going to deliver them one app to rule them all right after he pub-stomped some randos (FTX is also a $210 million sponsor of pro League team TSM). Yesterday, Sequoia zeroed out that entire investment as worthless.
“I don’t know how I know, I just do,” Adam Fisher, the author of the above excerpt, wrote in his glowing September profile. “‘[Sam Bankman-Fried] is a winner.’ Published 6 weeks ago,” a commenter quoting that part responded online. “Aged well, hasn’t it?” Fisher wrote back, “It’s cringe-y in retrospect. I’m not quitting my day job to become a tech investor, I’ll tell you that.”
But Fisher is just a freelancer. Who paid for the profile? Why, Sequoia of course. You can read “Sam Bankman-Fried Has a Savior Complex—And Maybe You Should Too” over on its website, but with a new editor’s note.
“We are in the business of taking risk,” reads part of a letter updating partners. “At the time of our investment in FTX, we ran a rigorous diligence process.”