Written David Yaffe-Bellany
The crypto executive Sam Bankman-Fried, who rose to fame building a $40 billion business in less than three years, stood in the wings at the Baha Mar convention center, wearing his usual schlub ensemble of shorts and a T-shirt. He was about to take the stage with Anthony Scaramucci, a former White House communications director who rose to fame losing that job in less than two weeks.
They were talking about other famous people. A couple of days earlier, Bankman-Fried had been shooting Twitter videos with Tom Brady, the NFL quarterback. “Brady was awesome,” Bankman-Fried said. “Maybe we’ll buy a football team together some day.” The Mooch put a fatherly hand on Bankman-Fried’s shoulder. “You couldn’t get a better guy,” he agreed.
Next the conversation turned to Orlando Bloom and Katy Perry, who had joined Bankman-Fried for dinner earlier that week. “Orlando is really sweet,” Bankman-Fried said, as a production assant fiddled with his microphone. They had met for the first time at a party in Los Angeles over Super Bowl weekend. “He just started talking to me.” It turned into one of those awkward situations, he said, where you know you’re supposed to recognize someone but can’t figure out who they are.
Bankman-Fried, 30, isn’t hard to pick out of a crowd: Known to the blockchain faithful as SBF, he is perpetually rumpled, with a mess of curly black hair exploding from his head. He founded the crypto exchange FTX in 2019, and has risen to become one of the richest crypto executives in the world. At Baha Mar, Scaramucci had dispensed with his suit jacket and donned a T-shirt and shorts to match those of his companion. When the lights dimmed, he and Bankman-Fried walked onstage to perform what passes for a comedy sketch at an international crypto conference: a bit of semi-scripted banter centered on their matching attire. “The Hanes special,” Bankman-Fried said.
The audience roared. It was late April, and Bankman-Fried was presiding over the first edition of the Crypto Bahamas conference, a showcase for FTX and a vivid demonstration of his growing celebrity and influence. Everywhere he went, crypto entrepreneurs offered handshakes and f bumps, patting him on the back as they pitched projects or presented him with branded swag. One afternoon, Bankman-Fried led a panel with Tony Blair and Bill Clinton, discussing blockchain technology and the war in Ukraine. “I’m glad you all came out here to see me today,” he said, to laughter from the packed house.
The laughter has faded. Over the past few days, the collapse of a so-called stablecoin called TerraUSD has sent the crypto market into meltdown, accelerating a dramatic sell-off that tanked the price of bitcoin and ether, the two most valuable cryptocurrencies. At Baha Mar, Bankman-Fried was throwing a giant party for the industry; this past week, he was attempting to restore calm, tweeting long threads about the state of the market.
Miner Philip Davis speaks at the opening of the Crypto Bahamas conference in Nassau on April 27, 2022. Davis has welcomed crypto investors to the Caribbean nation. (Erika P. Rodriguez/The New York Times)
It’s a dual role that he has been happy to embrace. For years, the crypto industry was dominated political ideologues, shameless grifters and rich guys with yachts. Bankman-Fried is hoping to put a new face on the still-chaotic world of digital assets. He lives modestly for a billionaire and has pledged to give away virtually his entire fortune, which currently stands at $21.2 billion, according to Forbes. A growing force in political fundraising, he has a super PAC that recently gave more than $10 million to a Democratic congressional candidate who supports some of his philanthropic priorities.
In public, Bankman-Fried can sometimes seem uncomfortable, tapping his foot or twirling a fidget spinner. But the awkwardness is part of a calculated self-presentation. Over countless tweets, interviews and TV appearances, he has positioned himself as a mad-scient-cum-diplomat — a straight-talking brainiac willing to embrace regulation of his nascent industry and criticize its worst excesses.
Now Bankman-Fried is trying to leverage his fame to set policy in Washington, at a moment when the risks of crypto trading are growing increasingly stark; he makes regular trips to the Capitol from his base in the Bahamas, meeting with regulators and testifying in Congress. If he’s successful, he could become one of the most influential figures in the new era of technological experimentation that supporters call web3, writing the rule book for a slew of risky investment products that are increasingly reshaping the internet, finance and even the arts.
But his detractors say his advocacy is driven self-interest. His political contributions have prompted complaints that he’s dorting the competitive landscape to advance his own agenda. And the charm offensive in Washington has alarmed consumer advocates who argue that FTX is exacerbating the volatility in crypto markets and putting investors at risk.
FTX serves as a portal to the crypto world. With the click of a button, a curious investor can turn dollars into bitcoin, dogecoin or ether. It’s as simple as buying paper towels from Target — except that the value of a digital asset can be wiped away overnight amid the types of market gyrations that have sent cryptocurrency prices crashing over the past month. In the United States, crypto exchanges occupy a regulatory gray area: It remains unsettled whether the tokens are securities, commodities or something else entirely. Bankman-Fried has been pitching a regulatory structure with expanded authority for the Commodity Futures Trading Commission, which is smaller and less aggressive than the Securities and Exchange Commission and has traditionally been more sympathetic to the crypto industry.
FTX is based in the Bahamas partly because 80% of its $1.1 billion in global revenue stems from a trading instrument that remains illegal in the United States. On the FTX platform, investors can borrow money to make enormous bets on the future prices of cryptocurrencies, leading to potentially astronomical gains — or catastrophic losses. These kinds of risky trades are hugely popular worldwide. Bankman-Fried is now urging the trading commission to permit such leveraged bets in the United States, which would set a useful precedent for other crypto firms offering experimental products.
Even as the market crashed this past week, Bankman-Fried was busy making that case. On Thursday, he was in Washington for a hearing in front of the House Agriculture Committee, where he defended FTX’s trading proposal and held forth on the importance of federal crypto regulation.
“It would serve a lot of interests at once,” he said. “That’s what we would love to be a part of doing.”
Raised as a utilitarian
Before making any kind of business decision, Bankman-Fried weighs the options in quantitative terms. “What’s the expected value?” he often asks co-workers, before assigning numbers to each possible outcome: A good result has positive EV; a bad one, negative EV. Once, while a few colleagues were cracking crypto-themed sex jokes in the office, he whirled around in his chair. Was there positive EV, he wondered, in dributing condoms with jokes on them at an upcoming conference? (The answer was yes: “Never breaks,” one of the FTX-branded wrappers read, “even during large liquidations.”)
The origins of that pragmatic style can be traced back to his childhood in the Bay Area. Both Bankman-Fried’s parents are Stanford Law School professors who have studied utilitarianism, an ethical framework that calls for decisions calculated to secure the greatest happiness for the greatest number of people. “It’s the kind of thing we’d discuss in the house,” said Bankman-Fried’s father, Joseph Bankman.
As might be expected for a young man raised on dinner-table discussions of moral theory, Bankman-Fried is also an admirer of Peter Singer, the Princeton University philosopher widely considered the intellectual father of “effective altruism,” an approach to philanthropy in which donors strategize to maximize the impact of their giving. When Bankman-Fried was an undergraduate at the Massachusetts Institute of Technology, he had lunch with one of Singer’s disciples, Will MacAskill, a co-founder of the Center for Effective Altruism. “He was like, ‘Oh, yeah, I was raised as a utilitarian,’” MacAskill recalled. “I didn’t know that happened.”
MacAskill pitched Bankman-Fried on an approach to effective altruism known as “earning to give” — a model in which do-gooders devote themselves to lucrative careers, aiming to earn as much as possible before giving it away. Bankman-Fried was intrigued. After graduating with a physics degree, he accepted a job at the high-frequency trading firm Jane Street and started donating half his salary to charity.
After leaving Jane Street in 2017, Bankman-Fried started Alameda Research, a crypto trading firm. The industry was booming. Entrepreneurs launched new coins practically every day, as the government rushed to keep up. “Everyone was talking about crypto,” Bankman-Fried said. “It’s actually something you can access as an individual; you don’t need to be a large corporation with a decade of built-up experience.”
He rented office space in Berkeley, California, where his staff of 20-something traders worked around the clock.
Bankman-Fried essentially lived at work; most nights, he slept on a beanbag parked next to his desk. Occasionally, he’d stop his apartment to take a shower, then change into khaki shorts and jog back to the office, the only exercise he could fit into his schedule. Colleagues were both inspired and perplexed his commitment. “We’ve always had beds in the office. We always convert the conference room into a bedroom,” said Sam Trabucco, an early Alameda hire. “He never uses them. He likes the beanbag chair.”
Around the time he started the firm, Bankman-Fried noticed a quirk in the crypto markets: The price of bitcoin in Japan was about 10% higher than in the United States. That differential presented an opportunity for cross-border arbitrage. Alameda could buy bitcoin in the States and sell it in Japan, pocketing the profits. This seemingly simple trade was complicated the financial sector’s deep suspicion of digital assets, which were still considered the domain of hackers and drug dealers.
Bankman-Fried in Nassau, the Bahamas, on April 26, 2022. Bankman-Fried, a studiously disheveled billionaire who made a fortune overseeing trades that are too risky for the U.S. market, now wants Washington to follow his lead. (Erika P. Rodriguez/The New York Times)
Large crypto transfers set off alarm bells at U.S. banks, forcing Alameda to improvise. The young traders were convinced that crypto was the future of money, but the tools they needed to buy and sell it were decidedly old-fashioned. “We spent hours every single day inside banks, like a physical location close to the office, sending manual wires,” recalled Nishad Singh, an early Alameda employee who is now the director of engineering at FTX.
Despite the obstacles, the arbitrage operation netted Alameda $20 million in just three weeks. But Bankman-Fried soon discovered other limits on the firm’s trading strategy. He was frustrated with the infrastructure on exing crypto exchanges, which he thought were often poorly run.
In 2018, Bankman-Fried flew to Macao for a crypto conference. It was the first time since Alameda’s founding that he’d ventured outside a 1-mile radius of the Berkeley office. He traveled around Asia, meeting industry colleagues in person for the first time, and began imagining new possibilities for the business in a friendlier regulatory environment.
A few days after his arrival, he sent a Slack message to his colleagues in California: The firm was losing millions of dollars in expected value staying in the United States.
Cultivating a mystique
Within months of the conference, Bankman-Fried had moved his band of quants to Hong Kong. He eventually delegated control of Alameda to some of his longtime colleagues, and started building a new exchange. The timing of FTX’s founding was perfect: After a crash in prices, the cryptocurrency market was poised for a pandemic boom. Bankman-Fried and his colleagues soon became enormously wealthy. FTX was processing hundreds of millions of dollars in trades every day, taking a cut of 2 basis points (or two one-hundredths of 1%) on most transactions. Big-name venture-capital firms like Sequoia and SoftBank lined up to invest. FTX and its U.S. affiliate are now valued at a combined $40 billion.
As his business grew, Bankman-Fried began to establish a public profile, tweeting about his favorite video games and going on TV to explain crypto to the masses. But he refused to comport himself like a typical CNBC guest. Before one of his first TV appearances, Andy Croghan, a colleague at Alameda and FTX, urged him to clean up his look.
“I was like, ‘Sam, you’ve got to cut your hair, dude — it looks ridiculous,’” Croghan said. “And he said: ‘I honestly think it’s negative EV for me to cut my hair. I think it’s important for people to think I look crazy.’”
Croghan learned to embrace that strategy. Bankman-Fried often takes power naps on his beanbag between meetings. At the FTX office in Hong Kong, Croghan would arrange for high-profile visitors to arrive while Bankman-Fried was still sleeping, ushering them into a conference room with a view of the slumbering chief executive. Eventually, Bankman-Fried would rouse himself and walk into the meeting, usually wearing shorts. The aim, Croghan said, was to cultivate a mystique. “Sam and I would intentionally not wear pants to meetings,” he said. “Sam literally said to me, ‘The only people I think I’d wear long pants for are Congress.’”
Bankman-Fried stuck to his word. He testified at a congressional hearing in December, wearing a dress shirt and long pants, his shoe laces tied in a bizarre-looking triple knot. He also dressed up for a meeting in April with Caroline Pham, a newly appointed commissioner on the CFTC, where he discussed the leveraged trading proposal. On Twitter, Pham posted a photograph with Bankman-Fried, which she later deleted after critics accused her of cozying up to the industry. (In a statement, Pham said that she posted the photo to promote transparency, and that she pressed FTX on a number of aspects of its proposal, including protections for retail customers.)
Last year, Bankman-Fried moved FTX to the Bahamas, where the government has established a relatively friendly regulatory framework for the crypto industry. From his new base, Bankman-Fried can easily travel to Washington. Virtually all the major crypto companies have lobs there, but Bankman-Fried’s direct involvement is unusual for a chief executive.
“A firm can hire an army of D.C. lobs to walk into a congressperson’s office,” said Brett Harrison, the president of FTX’s U.S. arm. “That’s not nearly as effective or as important as the people who are actually running the company. We’ve had such a warm reception.”
The company’s aggressive lobing in Washington has alarmed consumer advocates. The leveraged futures trading that FTX wants to offer in the United States can be a risky proposition, especially in a market as volatile as crypto. “It’s just something that frankly, people should not be doing,” said Lee Reiners, a former Federal Reserve official who now teaches at Duke Law School. “These are going to be largely unsophicated traders, and I just don’t think it’s a suitable product for anyone.”
In an interview at the resort in the Bahamas, Bankman-Fried insed that FTX’s platform was safe: The company has installed protections for retail investors, he said, and reduced the amount of leverage available to traders. “We are talking regularly with all of our regulators,” he said. “It would be pretty weird if the regulators were refusing to talk.”
The company’s Washington advocacy is only one element of Bankman-Fried’s broader agenda. He’s become an increasingly influential figure across the finance industry, and recently bought a 7.6% stake in Robinhood, the stock-trading platform. Over the past two years, he’s also been a prolific political fundraiser. His $5.6 million contribution to Joe Biden’s presidential campaign made him one of the biggest Democratic donors of the cycle. In 2021, he started a super PAC, Protect Our Future, which has donated more than $10 million to Carrick Flynn, a first-time candidate running in Oregon for the House of Representatives. The aggressive spending has prompted complaints in that state, where a rival candidate said Flynn was being bankrolled “a tax-dodging billionaire in the Bahamas.” (Flynn did not respond to requests for comment; the primary is scheduled for Tuesday.)
Bankman-Fried said his contributions have nothing to do with crypto. He’s interested in the race, he said, because Flynn supports projects he’s funded with his philanthropy, like efforts to prepare for the next pandemic. Last year, Bankman-Fried gave away $50 million, funding pandemic-related causes and research into artificial intelligence. He is also supporting climate change mitigation, as well as more idiosyncratic projects, like space-focused research into the “governance of planets.” This year, he plans to give away as much as $1 billion.
“The things that matter most are the things that have long-term impact on what the world will look like,” Bankman-Fried said. “There are trillions of people who have not yet been born.”
That’s not a universally accepted approach to philanthropy, even among effective altrus. Singer, whose scholarship helped inspire the movement, said he has gotten to know Bankman-Fried over the years and called his philanthropy “wonderful and really quite amazing.” But behind the scenes, Singer has encouraged him to tackle more of the problems bedeviling the world today.
“I’ve urged him to think about giving to an effective charity helping people in extreme poverty,” Singer said. “I’m not sure I persuaded him of that.”
No time for parties
Bankman-Fried spent much of Crypto Bahamas shuttling from his laptop to the convention stage. Even his mother, Barbara Fried, had trouble getting time alone with him: As she tried to catch his eye one afternoon, a blockchain bro in a polo shirt cornered Bankman-Fried, asking him to film a birthday message for a friend. A few minutes later, he was backstage, shaking hands with Tony Blair and making awkward small talk about Brexit.
Unlike some crypto conferences, the gathering in the Bahamas was an invitation-only affair, and it drew a high-rolling crowd. As a party favor, FTX’s guests were offered discounts at a private jet company. On the bus ride to a beachside party, one attendee talked up his crypto yacht collective — “the most exclusive club that’s the most inclusive once you’re in.”
In places like Puerto Rico, the arrival of crypto millionaires chasing tax breaks has sent housing prices skyrocketing, outraging longtime residents. But the political leadership of the Bahamas has welcomed FTX with open arms. Prime Miner Philip Davis began the first day of conference programming with an enthusiastic speech, declaring that crypto entrepreneurs are “better wired for innovation and change than most people on the planet.” Later, in an interview, Davis said he’d been pleasantly surprised when Bankman-Fried wore a suit to a meeting at his office. “We want you here,” Davis recalled telling him.
Bankman-Fried skipped most of the conference festivities, but he didn’t neglect his hosting duties. He had dinner with Blair and Clinton, and rarely turned down a selfie. He also made plenty of time for Scaramucci, the chairman of SALT, a corporate events organization that helped put on the conference.
SBF’s double act with the Mooch marked the end of Crypto Bahamas. Back in the green room, FTX staffers exchanged hugs and high-fives. Bankman-Fried was scrolling on his phone. He stretched and ran his hands through his hair. Then he checked his watch. The comedy bit had taken about four minutes. “I’ve got a lot of emails to catch up on,” he said.
Outside, the convention center was emptying, as hundreds of crypto enthusiasts headed for the airport. It was the calm before the coming meltdown. To leave the resort, guests had to walk through the Baha Mar casino, the largest in the Caribbean, a brightly lit hall of flashing slot machines.
This article originally appeared in The New York Times.