Crime

The FTX founder is the sort of sanctimonious fraud our species knows well

Dame Edna Everage says one of life’s most precious gifts is the ability to laugh at the misfortunes of others. You may lament this instinct, yet we all harbor it. New Yorkers are especially prone when it comes to property envy. Every couple of years, it feels like, a skyscraper goes up in the city that is significantly taller than the previous very tall new skyscraper. Each time one does, the only thing that goes higher than the tower’s residences is the cost of purchasing them. So with what rapture do New Yorkers read about the misfortunes these buildings go through. Oh, the thrill of learning that they sway in the wind, that people get seasick in the penthouses, that when owners put their garbage in the trash chutes the noise on the lower floors is like a tactical nuke.

Will there be Madoff or Holmes like jail time for Sammy?

Unlikely given his parents Dem party standing.

Disgraced FTX boss Sam Bankman-Fried looks distressed as he hunkers down with Mommy & Daddy at his $40M penthouse hideaway in the Bahamas

As CEO of Alameda Research, Ms. Ellison took a leading role in helping Sam Bankman-Fried build the FTX empire

On a video call in early November, employees at Alameda Research dialed in to learn the fate of the trading firm, which was teetering on the brink.

It was up to Caroline Ellison to deliver the bad news. Alameda was at the center of Sam Bankman-Fried ‘s collapsing FTX empire. Ms. Ellison, who had just turned 28, was at the center of Alameda. And they were all in crisis.

Alameda and crypto exchange FTX were both the brainchild of Ms. Ellison’s friend Mr. Bankman-Fried, and he had picked her to help lead Alameda the year before. For a time, they rode the crypto wave together, with FTX eventually notching a blockbuster valuation of $32 billion. This month, it all came crashing down in a matter of days.

Another episode of empty rich kids doing bad.

As the sun beat down on the Baha Mar resort in the Bahamas, Sam Bankman-Fried was living his very best life.

On stage and before an invited audience, Sam was in his usual work attire of trainers, shorts and a T-shirt, but Tony Blair tried to put the founder at ease. “I’m feeling a little overdressed here,” Blair assured him. Between them, the former US president Bill Clinton chuckled.

… William, a construction site manager from California, was woken by a text from friends about potential trouble at FTX in the early hours of 8 November. At the time, the 40-year-old had about $85,000 of fiat currencies on the exchange, plus three bitcoins worth about $55,000 and about $10k in other altcoins – a significant chunk of his assets.

“I opened the FTX app, and tried to take it all out, but fiat withdrawals were limited to $25,000, so I did that and was told to wait 24 hours,” he says. “When I tried to withdraw the bitcoins I got an error message.”

After the crypto firm collapsed, the executive who handled the Enron debacle was brought in – and said he’d never seen anything like it

Casual observers could be forgiven for thinking the collapse of the cryptocurrency exchange FTX is another typical tale of financial mismanagement. That’s how its founder, Sam Bankman-Fried, terms it: a liquidity crisis that tipped over into a solvency one.

FTX had deposits and loans and when depositors tried to get their money back, FTX didn’t have it to hand. Sure, the loans were in fancy digital money, rather than stale dollars, but at first glance, it appears like just another big company failure.

Then you look closer, and it becomes clear that the whole edifice is in fact the corporate equivalent of three children in a trenchcoat pretending to be a fully grown man.

When FTX raised $420 million from an array of big-name investors in October last year, the cryptocurrency exchange said the money would help grow the business, improve user experience and allow it to engage more with regulators.

Left unmentioned was that nearly three-quarters of the money, $300 million, went instead to FTX founder Sam Bankman-Fried, who sold some of his personal stake in the company, according to FTX financial records reviewed by The Wall Street Journal and people familiar with the transaction.

Mr. Bankman-Fried’s cashout was large by startup-world standards, where such sales historically were taboo because they allow founders to reap profits before investors. Mr. Bankman-Fried told investors at the time it was a partial reimbursement of money he spent to buy out rival Binance’s stake in FTX a few months earlier, according to some of the people familiar with the transaction.