Sam Bankman-Fried’s sudden turn is a washout from White Knight

Nov 11 (Reuters) – Sam Bankman-Fried earned a reputation as the savior of the crypto industry when he bailed out two platforms earlier this year. But FTX, the exchange he co-founded and led until Friday needed a lifeline, and none came.

Until this week, the 30-year-old American was seen as a darling of digital assets, amassing billions in personal wealth by running one of the world’s largest crypto platforms. But as traders rushed to withdraw funds from FTX, Banker-Fried balked and told investors he hoped the business would recover, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. He apologized several times.

“No one is saying that there is nothing wrong with SBF,” said Marius Ciupodariu, co-founder of the Hubble protocol, a decentralized credit platform. The company’s decline surprised markets because Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.

Known in financial circles by his initials, SBF, Bankman-Fried became a prominent and unconventional figure in the industry. He sported his signature wild hair, T-shirts and shorts in panel appearances with politicians such as former US President Bill Clinton and former British Prime Minister Tony Blair and supermodel Gisele Bundchen. Bankman-Fried quickly became one of America’s largest Democratic donors, contributing $5.2 million to President Joe Biden’s 2020 campaign.

The crypto wunderkind started his career at Jane Street Capital, a choice he says was influenced by his desire to make money to pursue his interest in efficient giving, which encourages people to prioritize donations to charities.

He amassed a fortune estimated at $26.5 billion by Forbes a year ago, taking advantage of bitcoin’s price differentials in Asia and the United States. Bankman-Fried eventually launched crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued at $32 billion in January.

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FTX’s meltdown sent bitcoin to a two-year low this week, amid concerns that the company’s woes could spread to other crypto firms. Employees were blindsided by its collapse, with some sending apologetic notes to customers expressing shock at what had happened, according to a person familiar with the matter.

FTX, John J. Ray III named the restructuring specialist as CEO on Friday. In 2001, he oversaw the dissolution of Enron, an energy trading company that collapsed into corruption and bankruptcy.

“A lot of people have compared it to Lehman — I would compare it to Enron,” former Treasury Secretary Larry Summers said in an interview with Bloomberg Television.

Despite her recent celebrity endorsements, fame and big-name backers, Bankman-Fried was pessimistic about FTX’s prospects in its early days.

“I thought we were going to fail,” Bankman-Fried said at a June conference a few weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would use it.”

Reporting by Hannah Long in Washington; Additional reporting by Anirban Sen in New York; Editing by Lananh Nguyen and Stephen Coates

Our Standards: Thomson Reuters Trust Principles.

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