The demise of "Musk in the currency circle": his net worth of tens of billions of dollars was confiscated, how he deceived the world

He regretted it, and what he regretted was that he had gambled wrong on the odds that he would be caught. He wouldn't admit anything.

U.S. District Judge Lewis Kaplan commented.

Last week, Sam Bankman-Fried (SBF), founder of US cryptocurrency trading platform FTX, was sentenced to 25 years in prison and confiscated $11 billion in assets on seven counts of conspiracy to defraud and money laundering.

Born in 1992, SBF is known as the "Musk of the cryptocurrency world", and the valuation of FTX, which he founded, soared to $32 billion within three years of its establishment.

Just as fast as the FTX jump is the speed at which SBF falls.

In November 2022, CoinDesk, a cryptocurrency industry news website, exposed the balance sheet of Alameda Research, a hedge fund company also founded by SBF, which revealed the existence of an $8 billion vulnerability in FTX.

Just 9 days later, FTX officially declared bankruptcy. A few weeks later, SBF was arrested in the Bahamas.

Another important label of SBF is "effective altruism", and he will actively express that he is "rich enough to help others as much as possible", and in this way, he will create a more credible image for himself and FTX.

Everything has collapsed today.

A "Founder's Story" that is more textbook than a textbook

Wearing a fluffy curly hair and a loose-fitting T-shirt and shorts, the most relatable image is sleeping on a giant bean bag couch.

SBF fulfills the essence of a "Silicon Valley genius": he must "not care" about his personal image, preferably not to sleep, and even if he does, he must sleep in the company, and of course, he must be a white man.

In an article that has been deleted from its website, Sequoia Capital said that they had been hooked on the young man when they listened to SBF's proposal in an online meeting.

Later, when they found out that SBF was actually playing League of Legends while "coping" with questions, they loved him even more.

At the age of 29, he appeared on the cover of Fortune magazine

More than anyone else, SBF's parents were law professors in one of the most important places in Silicon Valley — Stanford University, the birthplace of legendary tech companies like Google, Cisco, Yahoo, PayPal, and others.

Growing up in a small bungalow on the Stanford campus, SBF grew up with law school professors and students, as well as sociologists, engineers, and social scientists.

SBF's parents, Barbara Fried and Joseph Bankman, would tell The New Yorker that they discovered early on that their children craved to be treated as equals. At the dinner table, how to practice an ethical life is a long-term topic.

At a regular Sunday dinner, their law school professor friend, Larry Kramer, said "You'll understand when you grow up" while discussing social issues with SBF and his brother.

Afterwards, Bankman pulled him aside and said, "He wants his kids to be treated like adults. 」

From an early age, SBF was interested in mathematics and utilitarianism, the latter of which was also a theory that his parents believed in – doing good for as many people as possible.

SBF Parents

While studying physics at MIT, he met the man who helped him combine his favorite math and utilitarianism, Will MacAskill.

In developing countries, human life is still unreasonably cheap.

$2,000 can save a life, $1 million can save 500 people, $1 billion can save 500,000 people.

MacAskill, co-founder of Effective Altruism, believes that if a person's goal is to maximize the effect of the good they can do, then they can make as much money as possible and then donate that money to do good – that is, "earn to give".

Yes, that sounds reasonable.

Not only did this sharing help SBF find direction in life, but MacAskill also suggested that he intern at the hedge fund Jane Street Capital, where he learned to buy and sell stocks, and laid the foundation for the future establishment of FTX.

The beginning of the collapse

FTX Advertising: I'm in the crypto industry because I want to do the most impactful good in the world

In 2017, SBF did a great job at Jane Street Capital, the type of person where other colleagues would come and watch him learn.

At the same time, he also donates 50% of his income to charities, with the majority going to the Center for Effective Altruism and 80,000 Hours, both of which promote the "Make Money to Donate" campaign.

Everything went well, everything was too conservative.

Obviously, I care about influence.

Influence is about maximizing the odds that we can help them.

SBF said in an interview. In his opinion, in order to have more influence, he has to choose a more risky path that can get more wealth, and since in the end the money is to be given to help others, there is no reason to be afraid of this risk.

Back in Silicon Valley, he started researching cryptocurrencies and found that there were price differences between bitcoin on different exchanges, so he started arbitrage trading - buying on low-priced platforms and selling them at high-priced platforms.

This year, SBF co-founded Alameda Research, a hedge fund company with college friends, and seized the opportunity of traditional banks to lend money to the crypto industry, and became the top of the industry in just one year.

In 2019, at the suggestion of his father, SBF chose to move the fund to the Bahamas and established FTX, starting his own cryptocurrency trading platform.

He used his own Alameda to make a lot of trades on FTX to boost the reputation of the start-up trading platform, while also possibly giving Alameda additional information privately.

The U.S. Commodity Futures Trading Commission has accused FTX of providing Alameda with an "unfair advantage." This claim was later dismissed by SBF.

It was later learned that the relationship between the two companies did not stop there.

In December 2022, SBF said in an interview with the Wall Street Journal that in the early days, due to the strict management of cryptocurrency transactions, FTX once did not have its own bank account, and customers could only transfer money to Alameda when they wanted to deposit FTX, and then they would have money on their FTX.

SBF argued that not all of the money was transferred from Alameda to FTX because the finances weren't done well, and over time, there were serious problems with the accounts, and he didn't know about it.

In the ongoing trial in 2023, the testimony of former Alameda CEO Caroline Ellison showed that SBF was not unaware.

SBF has personally picked the "most obscure" version of the eight versions of Alameda's balance sheet, embezzling billions of dollars in user money even before the 2022 crypto crisis.

FTX's chief engineer said that as early as 2020, SBF knew that FTX had changed the platform code so that Alameda could borrow from FTX almost indefinitely. And this money is not used by FTX's own reserves, but by other customers' deposits.

Yet, over the past 10 months, SBF has tried to shift the blame to former employees, lawyers and competitors in court, insisting that its mistakes were "careless" rather than "deliberate."

While SBF's lawyer has said he will appeal, he seems to have come to terms with the fact that he is going to jail:

After all, the useful days of my life are probably over now.

Break the filter

With the fall of the iconic SBF, "effective altruism" has been more questioned. Aidan Gomez, CEO of AI startup Cohere, commented:

When people come to really believe that they are so unique and even qualified to benefit and save all of humanity, they tend to go to extremes to do so.

Some scholars have argued that the secular and long-term nature of effective altruism can lead to some "strange conclusions", such as the belief that reducing the risk of survival in the future by 0.0001% is more important than saving a billion people today, but it is difficult to predict what will happen in the coming decades, let alone millennia:

Instead of restricting their founders' control over philanthropy, the effective altruism movement has given them new tools to put the world at the service of their cynical ambitions and insane obsessions.

More commonly, celebrities who promote "saving the world" use their money to build a luxurious life for themselves in an opaque way. FTX's bankruptcy filings indicate that the company spent about $250 million to buy 35 properties in the Bahamas, using a private jet to transport Amazon Express from Miami to the Bahamas for employees.

FTX also does social projects, such as supporting a universal basic income research project in Chicago and sponsoring a mental health program in Southern California, but it also has a place for SBF's parents to work, and Stanford University donated $5.5 million to support their professional development. After the case erupted, Stanford announced that it would return the money.

However, SBF's parents also helped FTX a lot. It is said that Sequoia was actually hesitant when she invested in FTX, and SBF's parents' status as Stanford law professors was not only more "good-looking", but also after two friends, a former SEC official and current Stanford teacher, also called Sequoia to express their confidence in FTX's compliance prospects, and the financing was finally finalized.

In the opinion of Peter Goodman, an economic reporter for the New York Times, people have too heavy a filter on billionaires:

I feel like billionaires internalize that: "Look, I'm a billionaire, so not only am I good at building wealth, but I'm also a good person. 」

Because we all want to believe that our society is fair and rewards what is right.

Whether it's SBF, Musk and Zuckerberg, who showed their naivety in last year's "cage challenge", or Ultraman who showed both sides in "Gong Dou", they are all reminding us that it's time to disenchant billionaires.

As Whizy Kim, senior correspondent for Vox, puts it:

Billionaires are just as ordinary as everyone else, they have some strengths and weaknesses, and they can sometimes be inspiring and uplifting, but also often disappointing.

What makes them different from us is that they have billions of dollars on their hands, which gives them the power to make extraordinarily bad decisions that affect millions of people.