When Sam Bankman-Fried went to bed last night his $15 billion net worth made him the 94th-richest person in the world. Bankman-Fried, who also goes by “SBF,” earned his fortune as the founder and CEO of FTX, the world’s second largest crypto exchange. The 30-year-old was considered one of the most powerful and respected figures in the digital asset industry. He was the curly-haired, friendly face of crypto. He appeared in commercials, on billboards and in front of Congress hoping to bring mainstream legitimacy to crypto. He planned to donate his entire fortune, which topped $25 billion not terribly long ago, to charity.
That was yesterday.
The 12 hours between 8pm November 7, and 8am November 8, may go down as the most staggering vanquishing in business history, culminating in the absolute evisceration of Sam Bankman-Fried’s entire empire.
(Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)
Let’s jump back in time a few days.
If we were to look at our list of the world’s 100 richest people earlier this week, just a few notches above Sam Bankman-Fried’s $15 billion listing, you would have seen this entry:
#92: Changpeng Zhao – $16 billion (Binance)
Changpeng Zhao, who goes by “CZ,” is the founder and CEO of Binance. Remember how I said Bankman-Fried’s FTX was the world’s second largest crypto exchange? Binance is #1. By a mile actually. On an average day in the last few weeks, Binance handled around $50 billion worth of trading volume, whereas FTX handled $5 billion.
I’ll give a general overview of the last few days in a moment, but if you want a detailed breakdown of the saga, check out this Twitter thread:
Here’s the 30 second summary of the FTX drama that is blowing up in crypto.
1/ How FTX (a multi billion dollar co) almost died overnight
2/ And why this is a god tier strategic move by @cz_binance
— Shaan Puri (@ShaanVP) November 8, 2022
So what just happened?
Binance and FTX started out as friends, with Binance actually being one of FTX’s early equity investors when it launched in 2019. Binance’s early equity investment grew to be extremely valuable as FTX raised ungodly amounts of money from private investors, including $400 million raised in January of this year, which valued FTX at…
$32 billion
At some point after that January raise, Binance decided it wanted to be bought out of its equity stake in FTX. The two sides agreed on a price of $2 billion. This is key: FTX used its proprietary token, FTT, to cover the $2 billion equity buyback.
Binance was seemingly happy to sit on their massive collection of FTT for months… until this week.
On the morning of November 6, CZ stunned the crypto world with a tweet in which he announced Binance was intending to liquidate its ENTIRE holdings of FTT “due to recent revelations that have came to light.”
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Why Was That A Big Deal?
Imagine two very large baby formula companies. Company B and company F. And imagine if, for whatever reason, company B kept a huge supply of company F’s rival’s formula in its warehouses. Now imagine if the CEO of company B announced “hey, we just learned some stuff about Company F that made very uncomfortable so are dumping all of our supplies of Company F’s formula in the ocean.”
What do you imagine parents at home would do with their supply of Company F’s formula?
You get the picture.
In the last 24 hours, the value of FTX’s token FTT plunged 80%.
And at 8:03 am (PST) on Tuesday, November 8, the run on FTT forced FTX to suddenly and quite unexpected sell itself to Binance in what SBF described as a “strategic transaction”:
1) Hey all: I have a few announcements to make.
Things have come full circle, and https://t.co/DWPOotRHcX‘s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc.).
— SBF (@SBF_FTX) November 8, 2022
Vanquished
Bloomberg just reported that the value of FTX and Bankman-Fried’s other company, Alameda Research, have been effectively “eviscerated.” Not quite to zero. But literally to $1 in total value for SBF’s net worth.
As a result, Sam Bankman-Fried’s net worth has fallen to $1 billion. That’s a 94% drop compared to yesterday, which Bloomberg describes as “the biggest one day collapse ever among billionaires.“
Sam’s biggest asset today is a 7.6% equity stake in Robinhood that he purchased back in May 2022 for $648 million. At today’s closing price, that stake today is worth around $620 million.