AMAC Exclusive – By Andrew Abbott
In a wide-ranging interview last Wednesday, the disgraced former CEO of cryptocurrency company FTX, Sam Bankman-Fried, essentially confessed to a number of potential criminal charges against him, laying out in shocking detail how his $10 billion net worth collapsed to virtually nothing in just a few days. Once touted as the vanguard of a movement to revolutionize the cryptocurrency market and bring it into the mainstream, Bankman-Fried has now sent crypto markets tumbling and left many experts wondering what the future holds for the volatile asset. But he is hardly the only person to blame for the scandal that has cost investors billions – he had a media establishment willing and able to assist him along the way.
In 2019, Bankman-Fried founded a “cryptocurrency exchange” called FTX. This company and other cryptocurrency exchanges are digital platforms on which customers can trade cryptocurrencies, somewhat like stocks or bonds. Customers can also exchange cryptocurrency for actual dollars.
Over the course of just a few years, FTX rose to become the third-largest cryptocurrency exchange in the world, and one of the most influential. The company acquired other smaller platforms, hired high-profile celebrities like Tom Brady and Larry David to promote the company, and paid $145 million for naming rights to the Miami Heat basketball stadium. FTX even created its own cryptocurrency, FTT Token.
Throughout this meteoric rise, Bankman-Fried became a darling of the mainstream media. Forbes named him a “Top 30 Under 30,” along with several of his top executives. Articles postulated that he would be the world’s first trillionaire.
Despite his tremendous wealth, Bankman-Fried aggressively worked to cultivate an image of himself as a humble altruist who eschewed material comforts. In a glowing interview with Bloomberg, he said he slept in a beanbag chair next to his desk, drove a Toyota Corolla, and shared living quarters with 10 other coworkers. He told reporters that he only needed $100,000 to be happy and would give the rest of his multi-billion-dollar fortune away to charity. Bankman-Fried purported to be an advocate for “effective altruism,” a progressive philosophy that stresses one should become as wealthy and successful as possible to then give away any amassed fortune.
Beneath the surface, however, Bankman-Fried’s giving was far less altruistic than the mainstream media let on. Many of the media outlets who lavished praise on him and FTX were at the same time accepting large sums “investment grants” from FTX-linked funds. Bankman-Fried became the second largest donor to the Democrat Party in 2022, behind only George Soros. He later pledged to spend $1 billion to support Democratic candidates but quickly walked back the claim. He also met over a dozen times with senior government regulators and championed his version of a new regulatory bill that would “bring greater transparency and accountability” to crypto markets.
Then, in early November, a number of stories revealed that FTX had questionable and potentially illegal ties to the trading firm Alameda Research. Bankman-Fried founded Alameda in 2017 and then handed control of it over to Caroline Ellison, a 28-year-old romantic partner. On November 2nd, a CoinDesk article revealed that most of Alameda’s $14.6 billion in assets was invested in FTT Tokens. This left Alameda deeply vulnerable to a potential “run” on the token; if other investors sold their FTT Tokens, Alameda’s value would collapse.
While Ellison dismissed the story, the value of FTT Tokens immediately began to crater. By November 8th, customers had withdrawn over $6 billion from FTX amid fears the exchange might collapse. From November 4th to the 13th, the value of FTT Tokens dropped from $25.47 to $1.50, shattering both FTX and Alameda.
A rival exchange firm, Binance, had initially offered to buy out FTX, thereby bailing out Bankman-Fried. However, Binance backed out of the purchase almost immediately after reviewing FTX’s finances. In the days that followed, crypto markets reeled from the shocking allegations of how Bankman-Fried had mismanaged, abused, and potentially fraudulently misled the public as the steward of FTX. The Wall Street Journal reported that he had used funds that customers had deposited in checking accounts on FTX at his own discretion – most notably to give Alameda $10 billion in liquidity when they faced a financial crunch. This practice is highly illegal, and multiple reports have confirmed that the SEC and Department of Justice are investigating Bankman-Fried personally.
Contrary to his public-facing façade as a humble altruist, the disgraced crypto king now appears to have used the company – and the personal funds of investors – as “his own piggy bank.” Financial disclosures revealed that Bankman-Fried had purchased over $100 million worth of real estate in the Bahamas for top executives and family members, specifically a $16 million vacation home for his parents. His “humble penthouse” was a luxury home currently listed for $40 million, and former employees allege that his ten roommates were romantically intertwined.
Former employees say they were given a “full suite of cars and gas covered for all employees [and] unlimited, full expense covered trips to any office globally.” Most absurdly, when employees ordered items on Amazon, Bankman-Fried would charter private planes to fly from Miami to the Bahamas, as Amazon doesn’t currently operate in the Bahamas.
By November 11th, Bankman-Fried resigned in disgrace, and FTX filed for bankruptcy, as did Alameda Research. This past summer, economists and financial experts boldly predicted that a single Bitcoin would be worth $500,000 by 2027. As of December 1st, these same experts are now solemnly predicting Bitcoin could crash below $10,000. Thus far, the collapse of FTX has cost the cryptocurrency market almost $150 billion in value. Other popular cryptocurrencies like Ethereum and Luna have seen similar crashes.
Incredibly, the media continued their starry-eyed coverage of Bankman-Fried, downplaying the fact that he had cost investors billions of dollars by knowingly lying to them. The New York Times cover story on the scandal characterized Bankman-Fried’s crimes as “expanding his business interests too quickly.” A Washington Post puff piece after the scandal broke focused heavily on Bankman-Fried’s contributions to “pandemic prevention” and “climate change.”
In a court filing last week, John Ray III, who was brought in to manage Enron following a scandal of similar magnitude in 2001 and has now been hired to resurrect FTX, said he has never seen such “a complete failure of corporate control,” including at Enron. That may indeed be true. But that failure of corporate control extends beyond just FTX, and to a media establishment that failed to approach the FTX story with any degree of reasonable skepticism or objectivity, and has still refused to put their partisan leanings aside to honestly cover the story.
Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.