A post-mortem of cryptocurrency exchange FTX and founder Sam Bankman-Fried published on Monday in The New York Times drew criticism for portraying the disgraced wunderkind through rose-colored glasses.
The company filed for bankruptcy on Friday after users discovered that firms controlled by Bankman-Fried were allegedly fraudulently intertwined, triggering a liquidity crisis from users who rushed to withdraw funds and causing the young entrepreneur’s $15.6 billion fortune to disappear overnight. A number of individual customers and larger clients still have $8 billion stuck in frozen accounts as Bankman-Fried asks investors to help compensate users.
Alameda Research, a trading firm launched by Bankman-Fried and led by Caroline Ellison, with whom he had been romantically intertwined, allegedly borrowed customer holdings from FTX to make trades, according to a report from CNBC. The company underestimated the amount FTX needed to keep in reserves should customers want to remove their funds.
However, the article from The New York Times minimized the fraud allegations and fixated on Bankman-Fried’s personal life following his company’s implosion. The piece’s author, David Yaffe-Bellany, summarized that “his ambitions exceeded his grasp.”
Bankman-Fried, who is now under investigation by the Securities and Exchange Commission and the Justice Department, told the outlet that he had simply overestimated the margin position held by Alameda. “It was substantially larger than I had thought it was,” he claimed. “And in fact the downside risk was very significant.”
Though his cryptocurrency empire was ultimately a house of cards, the article lauded Bankman-Fried for building “an ambitious philanthropic operation,” investing in “dozens of other crypto companies,” giving “media interviews,” contributing to “political campaigns,” and offering Elon Musk “billions of dollars to help finance the mogul’s Twitter takeover.” Bankman-Fried, a self-proclaimed “effective altruist,” said he wished he had “bitten off a lot less.”
Musk, however, never seriously considered Bankman-Fried’s offer and doubted that he truly had billions of dollars in liquid capital ready to deploy in the acquisition. The article also failed to specify that Bankman-Fried had donated almost exclusively to Democrats ahead of the midterm elections and emerged as the second-largest contributor to the campaign which elected President Joe Biden two years ago.
Bankman-Fried’s parents, Stanford Law professors Joseph Bankman and Barbara Fried, are well-connected within Democratic circles, while his aunt, Linda Fried, is the dean of Columbia University’s Mailman School of Public Health and an affiliate of the World Economic Forum.
FTX was founded a mere three years ago and became an overnight success. Even before the fraudulent investment practices were exposed, the company had offered bogus promises to potential investors shortly after launch, as shown by resurfaced fundraising emails, one of which promised “high returns with no risk.”
The celebrities with whom Bankman-Fried had partnered as ambassadors and shareholders, including Tampa Bay Buccaneers quarterback Tom Brady and supermodel Gisele Bündchen, Golden State Warriors player Steph Curry, Jacksonville Jaguars quarterback Trevor Lawrence, basketball legend Shaquille O’Neal, celebrity investor Kevin O’Leary, retired baseball player David Ortiz, and tennis star Naomi Osaka, could stand to lose significantly from the company’s failure. It is not clear whether the celebrities paid in cryptocurrency continued to manage the digital coins in frozen FTX accounts.