At the start of this week, Sam Bankman-Fried had an impressive net worth which amounted to US$16 billion (AU$24.6 billion), according to the Bloomberg Billionaire Index.
The Founder & CEO of cryptocurrency exchange FTX wasn’t just one of history’s wealthiest individuals under the age of 30, but also an incredibly influential figure within the world of finance in general, once hailed as the JP Morgan of crypto.
But in the span of a single day, the MIT graduate’s enviable 11-figure funds would be reduced by an eye-watering 94%, leaving him with a comparatively meagre US$991.5 million (AU$1.5 billion), and without the status of “billionaire.” So where did it all go wrong?
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UPDATE [10/11/22]: Binance has just backed out of its plans to acquire FTX.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” the exchange expressed via Twitter.
“But the issues are beyond our control or ability to help.
Meaning SBF has now gone from being worth US$16 billion to owing approximately US$600 million.
Sam Bankman-Fried Net Worth: What The Hell Happened?
FTX encountered what’s known as a “liquidity crunch.” Basically, the empire was on the brink of collapse as it struggled to accommodate the sudden demand for withdrawals from investors who feared crypto would crash (even further).
With rising concerns surrounding the Bahamas-based exchange’s insolvency, rival operation Binance stepped in with some much-needed capital to prevent such an outcome. The latter’s CEO Changpeng “CZ” Zhao announced on Tuesday he’d come to a provisional agreement with Sam Bankman-Fried to acquire FTX.
While the bleeding/withdrawals had been slowed down, it also sent the price of FTX’s native token into a freefall; which is obviously what the vast majority of SBF’s fortune was tied to.
“Bankman-Fried also has holdings in Voyager Digital, the crypto lender that went bankrupt earlier this year,” points out Samantha Delouya of Business Insider.
“And Robinhood, of which shares closed down nearly 20% on Tuesday.”
In other words, despite still being worth far more than most of the world’s population, the wunderkind has certainly seen better days.
[Note: For a brilliant and easy-to-follow explanation detailing how Binance and CZ pretty much dismantled FTX, head over to the article recently published by Fortune here.]
All Part Of The Plan (Sorta)
When you’ve earned more money than anyone could possibly spend across several lifetimes, the reasonable thing to do is give it away. That’s why earlier this year, Sam Bankman-Fried publicly committed to just that by signing the Giving Pledge.
Joining the likes of Bill Gates, Warren Buffet, Mark Zuckerberg, Elon Musk, Larry Ellison, as well as Australia’s own Melanie Perkins and Cliff Obrecht of Canva fame, Bankman-Fried dedicated a decent chunk of his billions towards philanthropy (either during his lifetime or in his eventual will).
“A while ago, I became convinced that our duty was to do the most we could for the long-run aggregate utility of the world,” Sam Bankman-Fried wrote in his pledge letter.
“In the end, it’s the work my friends and colleagues at foundations do that matters the most.”
SBF is what’s known as an effective altruist, which entails striving to benefit as many people as much as possible and actually taking tangible actions to achieve said benefit.
“Five years ago, Sam Bankman-Fried was working for a charitable organisation that promoted the then-fringe idea of effective altruism: using scientific reasoning to figure out how to do the most good for the most people,” explained Zeke Faux of Bloomberg.
“Then he spotted a seemingly too-good-to-be-true pricing anomaly in Bitcoin and decided that for him, the right path would be making tons of money to give away. Now, Bankman-Fried is one of the richest people in the world.”
“He’ll keep enough money to maintain a comfortable life: 1% of his earnings or, at minimum, $100,000 a year. Other than that, he still plans to give it all away – every dollar, or Bitcoin, as the case may be.”
“You pretty quickly run out of really effective ways to make yourself happier by spending money. I don’t want a yacht.”
Sam Bankman-Fried
Granted, the recent development is by no means how he’d envisioned offloading the billions that make up his (former) net worth, but at the very least, Sam Bankman-Fried no longer needs to worry about being unnecessarily rich.
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What Now?
At the time of this writing, Sam Bankman-Fried’s net worth has plummeted to just US$991.5 million. And FTX isn’t out of the woods just yet.
Should Binance suddenly decide it doesn’t want to go through the pain of due diligence and ditches FTX altogether – because keep in mind the agreement between SBF and CZ is non-binding – we could still be on track to witness the full-blown collapse of an empire.
Naturally, the implications of such an event would make a bad year for those HODL-ing certifiably worse.
Bankman-Fried also made rather sizeable donation promises at the top of 2022, setting aside up to $1 billion for Democratic party political candidates aligned with his “broader mission” of preparing for future pandemics. Safe to say, this probably ain’t happening anymore.
Somewhere out there, Warren Buffett and Bill Gates are enjoying their “I told you so” moment.
