Sam Bankman-Fried was one of the crypto kings: the FTX debacle has destroyed his reputation (and 94% of his assets)

had been called “the JP Morgan of cryptocurrencies” and even considered the next Warren Buffett. Sam Bankman Fried he seemed to have an uncanny ability to get everything right. At just 30 years old, this American graduate of the Massachusetts Institute of Technology (MIT) was the founder of the third-largest crypto exchange in the world, FTX, and the hedge fund Alameda Research. And of course, as expected, he was a billionaire.

In his rapid rise to the top of the crypto world, Bankman-Fried built a reputation and fueled his ambition. His name appeared everywhere when, with the fortune of his companies, he offered to board troubled projects like Celsius or Digital Voyager. He was even confident that FTX would one day be so big that it could take over US giant Goldman Sachs. Much of this is now disappearing.

The collapse of a house of cards

In the eyes of the public, everything has happened very quickly. FTX, has gone from being considered one of the most valued exchanges, due to its ability to survive the crypto winter, to be the one compared to Lehman Brothers for the possible earthquake that could cause in the crypto market. The collapse began last week when CoinDesk noted which, according to a leaked document, Alameda Research held an unusually large amount of FTT, the FTX token.

Technically, these were companies that operated independently. However, the report revealed that they were closely connected. According to The Wall Street Journal, FTX reportedly took billions of dollars of its clients’ money to transfer to its sister firm. Alameda Research would have used this huge amount of money to boost high-risk investments.

Thus, the alarms of possible liquidity problems went off and, most importantly, doubts were sown about the transparency of the companies. Changpeng Zhao, the founder and CEO of Binance, was quick to announce that it would liquidate all FTT tokens held by Binance due to “the recent revelations” about the Bankman-Fried companies.

Within hours, FTX users withdrew about $6 billion, which left the platform in serious trouble to meet its obligations. After this, hope returned slightly with the purchase attempt by Binance. However, the world’s largest exchange decided to back down after reviewing the company’s books and concluding that the issues were beyond its control or ability to help.

The truth is that this situation does not only affect FTX clients, who at the moment cannot withdraw their money. It also directly hits Bankman-Fried. The young entrepreneur according to the Bloomberg Billionaires Indexstarted the week with a net worth of about 15.6 billion dollars, but after the dark picture of their companies this could be around 1 billion dollars, that is, a sharp drop of 94%.

Bloomberg explains that if Binance had come to Bankman-Fried’s rescue, his assets from both FTX and Alameda Research would have been completely wiped out. The operation, as we have seen, has not finally been carried out, but Changpeng Zhao’s refusal to go ahead with the agreement has scared investors and clients.

The full extent of the financial problems facing the company is still unknown. Nevertheless, Bloomberg also points out who could face a deficit of 8,000 million dollars. In this sense, according to analysts, without an external actor to rescue it with a quick injection of capital, FTX faces a bankruptcy scenario.

Bankman-Fried still has hope of recovery. The businessman assures that he is discussing options “with several players” to save FTX. Also has assured that you will use “every penny” to meet your obligations to your customers. In any case, the patrimony of who until a week was considered one of the leaders of the crypto world is compromised and his empire is faltering dangerously.

Images: FTX

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