When we first read about Sam Bankman-Fried, the young crypto king, we thought, “wow what I was doing in my early 30s”. Some of us even felt the slightest tinge of envy. However, watching Bankman-Fried’s cataclysmic fall from grace, which happened as quickly as he was catapulted to fame, now serves as a cautionary tale for all.
Most of the world’s population at 30 are still trying to find themselves - and probably worth $10k or less. Sam Bankman-Frie on the other hand, was worth a cool $15bn by his late 20’s. The fintech wunderkind has rubbed shoulders with former political leaders like Tony Blair and President Bill Clinton. He can boast having giants like Ariana Huffington and Elon Musk on speed dial. At the height of its influence, Bankman-Fried’s empire - including his external blue-chip investments - was worth $32B in total.
However, it is clear that the King of Krypto’s reign is now over. Bankman-Fried and his company now find themselves falling towards a financial abyss, the free-fall totalling a 94% drop in his net worth. Unfortunately, he is not alone in his demise - his investors and millions of FTX deals will also see value deteriorate.
On Friday, the company filed for bankruptcy after failing to secure a last-minute rescue from its competitor which triggered $5bn being pulled out by customers in 24 hours. The issue here was poor management of cash flow and governance; an issue that is not isolated within the tech world. Ambitious, on-looking tech unicorns will view this episode with sympathy, a little bit of schadenfreude, and above all, similar concern. For, many will see Sam Bankman-Fried’s desperate need for $8bn to close the cash black hole, as a cautionary tale - or even a close call. Sam’s company FTX was valued at $33bn earlier this year. One of the company’s lead investors, Sequoia Capital, threw in investments worth $213 million; alongside world players such as Thomas Bravo, Blackrock, Softbank, Tiger Global and the Ontario Teachers’ Pension Plan.
Now in the red, these investors will have to fend off tough questions: specifically, how and where did they go wrong with FTX? Many are asking if this is the next Lehman brothers and the wild west for buyers and sellers. It was a humbling fall for the King, who had cultivated a reputation as an iconoclast, multitasking effortlessly and sleeping on a beanbag at the office.
The fallout of this tale will be doubts about cryptocurrency; specifically around viability and regulation. In the next few years, we can certainly expect regulation to be ramped up, as well as extra securities to safeguard the economy against these disruptors.
