- Hey, guys. It's Sam here.
- Sam Bankman-Fried is a 30-year-old former billionaire
who was the founder and CEO of FTX,
which was one of the world's largest crypto
trading platforms.
- He was known for his casual demeanor,
with an unusual, eccentric haircut.
- He wore a T-shirt and shorts and --
-Made it his thing thing that he was always working
and sleeping on the bean bag in his office,
totally committed to building his business.
- He had vowed to give away his wealth.
- He was one of the largest donors
to congressional campaigns over the last cycle.
- He gave $40 million. - He appeared
in front of congressional panels, courted regulators.
- My goal has been to find ways
to have positive impact on the world.
- When the crypto market entered a kind of slide --
-He was seen as the white knight.
- And it earned him comparisons to JP Morgan, Warren Buffett.
People even compared him to the Federal Reserve,
because he was emerging, seemingly,
as the lender of last resort for crypto.
In the last month, all of this has collapsed.
The business is in bankruptcy,
and his once $16 billion fortune has collapsed,
essentially, to nothing.
- What led to the bankruptcy filing was a report
by the news site CoinDesk.
- Set off by a leaked document
that raised questions about the company's finances.
- Alameda Research, Sam Bankman-Fried's
investment trading firm,
had unusually large holdings of a coin that FTX created
and issued for trading on its platform.
- The document showed that Alameda
was worth billions of dollars,
but the majority of that was FTT.
- Days later, Bankman-Fried's main rival,
a guy who goes by the name of CZ,
who is the founder and CEO
of a rival exchange called Binance --
-Tweeted that the company would be selling its FTT holdings
due to "recent revelations."
- Other customers of FTX thought to themselves,
"If this guy is dumping all of these shares of these tokens
because he doesn't believe they're gonna hold their value,
then it's possible the entire platform collapses.
We need to get our money off, too."
- It created panic
and also a precipitous drop in the value of the coin.
- They didn't have enough money to pay back their customers.
- It had to pause withdrawals.
- And within days, they ended up filing for bankruptcy.
- Around the time of the bankruptcy filing,
there was a "Wall Street Journal"
report that FTX had loaned customer funds
to Alameda Research to fund risky investments.
- Did you know that FTX deposits
were used to pay off Alameda creditors?
- Uh, I don't know of FTX deposits
being used to pay off Alameda creditors.
- There have been a bunch of crypto businesses
that failed this year.
- This month, Voyager froze withdrawals.
- The demise of algorithmic stablecoin Terra --
-The fall of FTX was particularly stunning
for a number of reasons.
- In part, because of the scale of it.
This was a company that was valued
at $32 billion in January.
- FTX had sort of casted itself
as this beacon of crypto legitimacy,
and had done so through Super Bowl ads,
putting its name on major sports arenas,
on referee jerseys, just really cast itself
as being a very safe avenue into the crypto world.
- With FTX, I have everything I need to buy,
sell, and trade crypto safely.
- We think there are over a million customers
who have been impacted by the collapse of this company.
- Large institutional investors
who had put hundreds of millions of dollars into FTX,
and then also just individual, ordinary retail investors.
Some have said that, you know,
they've lost their entire life savings.
It's unclear if they're going to get their money
back through bankruptcy proceedings.
- We think it's about $8 to $10 billion in customer funds
that FTX is not able to pay back.
- I think this is a time when people are wondering
whether that market has been
left untouched by regulators for too long.
- Going forward, we're going to have hearings
in the Senate Banking Committee
and the House Financial Services Committee.
Separately, there are investigations unfolding.
federal prosecutors in Manhattan,
the Justice Department, the SEC, the CFTC, state regulators,
and then investigators in foreign jurisdictions,
because this was really an international company,
are all working on trying to piece together
exactly how this happened, who knew what when,
and what kind of accountability should they face?
I think Sam Bankman-Fried is facing a very rough road.
- So many ordinary people were lured
by the promise of high gains on their investment.
- It's gonna take months, I think,
before we really understand entirely what happened at FTX.
It's just a fascinating human story.
On another level, this raises serious issues and questions
for policy makers in Washington,
because this industry has presented itself
as the future of money, the future of finance.