03 November 2023 , 10:30
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Sam Bankman-Fried was convicted on Thursday for what prosecutors called the “one of the biggest financial frauds in American history” after he embezzled $10 billion of his clients’ money.
Bankman-Fried founded his FTX cryptocurrency exchange in April 2019 which grew to be worth a whopping $32 billion before it collapsed in November last year. Many saw 'Crypto King' Bankman-Fried as the next big thing in finance. Only 31-year-old, he was lauded as the next Steve Jobs - and wanted to push a philanthropic mantra of “Effective Altruism” with his wealth.
But it all came crashing down after the authorities opened investigations into FTX, while questions simultaneously emerged around how much of the huge $32 billion valuation was in fact based on FTT, FTX's own crypto token. Customers attempted to withdraw their money and FTX crashed, soon shutting down.
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Barbara Fried and Joseph Bankman broke down in tears when their son was convicted (AP)It later emerged Bankman-Fried had been syphoning customer funds into his crypto trading firm Alameda Research, of which he owned 90 per cent. The Forbes 30 Under 30 lister had embezzled $10 billion of customer funds from FTX into Alameda. On December 12, 2022 he was arrested - and after being convicted yesterday (November 2) on all seven counts, he faces up to 115 years in prison.
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But how did he become one of the world’s most notorious financial fraudsters of all time?
A privileged upbringing
Born on March 6 1992 on the campus of Stanford University and to two professors at Stanford Law School, Barbara Fried and Joseph Bankman, Bankman-Fried certainly led a comfortable childhood. Barbara and Joseph, champions of liberal causes, recognised Bankman-Fried’s intellectual potential from an early age.
The parents come from modest backgrounds, and Bankman-Fried and his younger brother, Gabriel, were raised in a one-story bungalow on the Stanford campus. They are both subscribed to left-of-centre economic beliefs, believing in tax law to be used to promote social fairness. This was perhaps behind Bankman-Fried’s commitment to philanthropic ventures as he began raking in huge sums.
It was a desperately sad day for Bankman-Fried's parents, who may never see him outside prison again (Getty Images)As a highly mathematically-talented student, Bankman-Fried attended Canada/USA Mathcamp. He attended a fee-paying school - Crystal Springs Uplands School in Hillsborough, California - before graduating in 2014 with a bachelor's degree in Physics with a minor in Mathematics from Massachusetts Institute of Technology.
After interning at trading firm Jane Street Capital, he returned full time after graduating. Bankman-Fried left Jane Street in September 2017 and moved to Berkely, California, to take on a role as director of development at the Centre for Effective Altruism (CEA). It was just two months later, in November 2017, that the crypto fraudster opened up his company Alameda Research with Tara Mac Aulay from CEA.
Political ventures
Bankman-Fried’s ‘altruistic’ ventures weren’t limited to philanthropy - he also wound up being one of the largest political donors of the last decade and it is claimed he harboured ambitions of being President himself one day. In the 2020 election, he donated $5.2 million to two super-PACs which were pushing for Biden’s presidency - and wound up being the second largest donor to the democrats during that campaign after Michael Bloomberg.
Sam Bankman-Fried was snapped mingling with the stars - including pop star Katy Perry and actor Orlando Bloom (Twitter)Donations were made to members of both parties, but heavily weighted towards the Democrats. He donated a total of $262,200 to Republicans including senators Susan Collins, Mitt Romney, Lisa Murkowski, and Ben Sasse in 2021/22. In the same period, he contributed $27 million to the Democrat-supporting Protect Our Future political action committee.
In May 2022, Bankman-Fried claimed he planned on spending “north of $100 million” on the 2024 presidential election with a “soft ceiling” of $1 billion - although later backtracked calling it a “dumb quote on my part”. Author and financial journalist Michael Lewis claims that Bankman-Fried looked into the legal viability of paying Donald Trump to not run for president - with the disgraced former president’s team apparently running a figure of $5 billion.
Bankman-Fried was one of the USA's largest political donors (AP)
Caroline Ellison, former CEO of Alameda Research founded by Sam Bankman-Fried, exits Manhattan federal court after testifying (AP)And star witness Caroline Ellison, his ex-girlfriend and CEO of Alameda Research, claimed he thought he had a 5% chance of being US president at some point in the future.
Whether a case of strong political beliefs or simply a desire to wield hefty political influence in Congress and the White House, we will never know for sure. But any influence he once had is now lost, with Bankman-Fried set to be locked up for decades.
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