What just happened
- Ukraine’s Zelensky visited the liberated city of Kherson, saying Ukraine was ready for “peace for all our country”.
- Paris overtook London as Europe’s biggest equities market in terms of primary listings’ market capitalisations.
- Jeff Bezos gave Dolly Parton, a vaccination advocate as well as singer, $100 million for her “courage and civility”.
This time last week Sam Bankman-Fried was notionally worth $16 billion as founder of a global crypto exchange and a derivatives trading company whose assets, he insisted, were “fine”.
He’s now
- bankrupt, along with 130 of the companies he founded;
- probably worthless; and
- apparently considered a flight risk in the Bahamas, where he was rumoured at the weekend to be considering a dash to Dubai in his private jet. Dubai has no extradition treaties with the West.
The collapse of Bankman-Fried’s FTX exchange and his Alameda Research trading firm is not just the cause of one of the fastest implosions of private wealth in history. It’s a bonfire of vanities from the Bay Area to Washington and a punch to the solar plexus for the entire fintech sector.
Thanks to SBF (as far as we know those are still his initials), reality is being recalibrated this morning in at least four places:
1. Cryptoland. The end of FTX doesn’t spell the end of cryptocurrencies. That won’t come until no one wants to buy them anymore, and Bitcoin is still trading at over $14,000 this morning. Nor is the SBF story mainly about crypto’s volatility, which hasn’t yet invalidated the basic case for a decentralised online currency. It’s more a story of delusion and greed in which
- $5 billion was withdrawn from FTX accounts by spooked investors eight days ago;
- $10 billion subsequently went missing from FTX, apparently diverted to Alameda Research as its principals scrambled for liquidity;
- $1-2 billion is still unaccounted for today, according to Reuters; and
- more than $400 million may have been “hacked” (stolen) from FTX on Friday evening as its staff tried to secure digital assets ahead of bankruptcy proceedings.
FTX and Alameda look less like new-fangled financial experiments than old-fashioned Ponzi schemes in which SBF recycled venture capital investments in the venture capitalists’ companies to sustain the myth that he was spreading wealth as well as creating it.
But crypto was still the starting point. The crypto boom of the pandemic years was the foundation of SBF’s fortune. It’s looking more and more like an old soufflée now; and vindication for that old-money megalodon Warren Buffett, who said it only ever attracted charlatans and would “come to a bad end”.
2. Techbroland. SBF never styled himself as a rival of the A-type tech titans prowling the digital frontier. He famously mussed his hair, slept on a beanbag and played League of Legends while on Zoom calls with investors. But he cultivated the image of the accidental billionaire propelled by his own nonchalant genius and in this has much in common with Meta’s Mark Zuckerberg, whose star has been fading for much longer. A time when untested claims of genius could release billion-dollar seed rounds seems to have ended this past weekend. The FT reports that SBF wasn’t even any good at League of Legends.
3. The world of philanthropy, where SBF pledged billions to good causes as an embodiment of the neo-Benthamite Effective Altruism movement. He shared panels with fellow evangelists like Tony Blair and Bill Clinton, even though they boasted smaller fortunes. Was it real, or was it marketing? For as long as his holdings’ value held, the money was real, but the do-good pitch was also an effective entrée into the world of nine-figure investments with scant due diligence.
4. The Democrats. SBF gave $40 million to the Democrats in real money to help fund their get-out-the-vote efforts in the build-up to the midterms. Expect to hear much more about this from Republicans before next month’s runoff Senate race in Georgia.
Deleted items:
- A 13,000-word paean to SBF on the website of Sequoia Capital, which invested $200 million in Alameda Research and accepted nearly as much in investments from SBF.
- SBF’s bio as a corporate partner on the website of the World Economic Forum.
