Sam Bankman-Fried's FTX empire was meant to revolutionise cryptocurrency and save the world. It didn't – ABC News

Sam Bankman-Fried's FTX empire was meant to revolutionise cryptocurrency and save the world. It didn't
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Only a month ago, Sam Bankman-Fried was hailed as a new American icon — the vegan billionaire boy wonder of cryptocurrency with a plan to save the world. 
Now his business empire is in ruins, his net worth has plunged to zero, and he is the target of multiple investigations as US authorities search for at least $US1 billion ($1.49 billion) in missing customer funds. 
Some people who invested in Bankman-Fried's crypto exchange, FTX, fear they will never see their life savings again. 
Bankman-Fried has blamed the meltdown on his former girlfriend, with whom he lived in a lavish Bahamas penthouse along with eight friends. 
The 30-year-old's downfall has been described as the "end of crypto" and evidence that "the bullish tech boyos in Silicon Valley" and their "godlike ambitions" are finally falling back to Earth. 
But in many ways, the collapse of FTX and its crypto king is a classic American story. 
A young billionaire built a cult of genius around himself through carefully cultivated eccentricities that opened the wallets of thousands of investors and won plaudits from former world leaders, models and sports stars. 
As the consequences of FTX's failure ripple through the cryptocurrency ecosystem as well as the lives of regular Americans, the question now is whether Sam Bankman-Fried could soon find himself in jail. 
"In many ways, this is a garden variety fraud or misuse of client funds," said Hilary Allen, a professor of law at American University, Washington College of Law. 
"But I think what's special about this is who Sam Bankman-Fried was to crypto. 
"The mystique around crypto, I think, has allowed such a huge fraud to perpetuate in an institution that had such flagrant governance failures from the outset." 
For Apple's Steve Jobs, it was the trademark black skivvy and jeans. For the disgraced Theranos founder Eilzabeth Holmes, it was a deep baritone voice many employees insisted was fake. 
Sam Bankman-Fried's mystique came from his quirky mop of hair, his penchant for wearing basketball shorts and t-shirts, and his insistence on driving a Toyota Corolla even as his personal wealth skyrocketed. 
Profiles of the young entrepreneur repeatedly noted the collection of beanbags scattered around FTX headquarters so Bankman-Fried could take a quick nap. 
He was breathlessly praised as a genius who could wow investors during meetings, while simultaneously playing videos games on his computer. 
"I want FTX to be a place where you can do anything you want with your next dollar," he told Sequoia investors as he played League of Legends.
"You can buy Bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX." 
The son of two prominent law professors, Bankman-Fried founded his cryptocurrency exchange FTX in 2019, enabling users to trade digital currencies as well as traditional money. 
Despite insisting FTX was "the cleanest brand in crypto" and promising customers "high returns, no risk", Bankman-Fried set up the company outside the US to avoid tighter regulations. 
He set up shop in Hong Kong before moving headquarters to the Bahamas. 
In just three years, FTX grew to become one of the biggest cryptocurrency exchanges in the world, with 1 million active users in July 2021. 
A-list celebrities including supermodel Gisele Bundchen, basketballer Steph Curry and comedian Larry David were lining up to endorse the company. 
Singer Katy Perry promoted FTX to women, writing on Instagram: "LISTEN UP LADIES Did you know that women only make up 7 [per cent] of the crypto world WHY ARE WE SETTLING FOR CRYPTO CRUMBS? LET'S GET THAT BAG OK". 
Bankman-Fried rubbed shoulders with former British prime minister Tony Blair and former US president Bill Clinton, who told the tycoon he'd learned all about crypto from his daughter Chelsea's friends.
His personal wealth swelled to $US16 billion ($24 billion), but the freshly minted billionaire insisted he did not plan to simply accumulate cash to watch his bank account grow. 
Instead, he claimed to be a follower of the philosophical movement known as "effective altruism", which encourages people to get lucrative jobs so they can amass wealth and donate it to charities. 
In glowing media profiles, Bankman-Fried was described as a "crypto Robin Hood", whose noble pursuit of mega wealth was "beating the rich at their own game to win money for capitalism's losers". 
The FTX founder rose from obscurity to become one of the US Democratic party's biggest donors, contributing more than $US45 million ($66 million) to election campaigns in less than 18 months.
He's also claimed to have donated huge amounts of so-called "dark money" to Republicans to avoid scrutiny.
By late 2022, the 30-year-old had pledged to give away all his money and was on track to become one of the most influential philanthropists in America. 
But then everything fell apart. 
Bankman-Fried would see his fortune shrink by 94 per cent in 24 hours, the biggest wealth collapse of a billionaire ever in a single day. 
By the time his bank account hit zero, the man who insisted he would one day be the "world's first trillionaire" had left only a trail of destruction in his wake. 
Bankman-Fried's transformation from hero to villain happened practically overnight. 
On November 2, a crypto trade publication raised questions about the relationship between FTX and Bankman-Fried's trading house, Alameda. 
Ostensibly, they were two separate companies that happened to be controlled by the same man. 
But Coindesk said Alameda's financial health rested "on a foundation largely made up of a coin that a sister company invented". 
From there, things spiralled out of control rapidly. 
While Bankman-Fried owned the second largest exchange in the world, his arch nemesis, Changpeng Zhao was the biggest fish in the crypto pond. 
In a single tweet, Zhao kickstarted a chain of events that would leave FTX in ruins. 
He said that he was selling off $US580 million ($854 million) worth of FTT — FTX's in-house token — due to "recent revelations" about the company. 
As panic spread through the crypto community, it looked like none other than Zhao himself would have to come to the rescue and bail out his former rival. 
Then in an abrupt reversal, he pulled out of a deal less than 24 hours later saying FTX's problems were "beyond our control or ability to help". 
With all the hallmarks of a 19th century bank run, customers raced to withdraw their money from FTX, with more than $US6 billion ($8.85 billion) taken out in 72 hours. 
With FTT suddenly worthless, FTX customers came to a stunning realisation: They handed over very real money to buy a digital token that was used to make speculative bets. 
The money was gone. 
"What it looks like happened is that customer money was taken from the FTX brokerage and transferred over to its related hedge fund Alameda Holdings to cover a very significant hole, I think in the order of $8 billion," Professor Allen said. 
As the ashes of his empire smouldered, Bankman-Fried texted reporters, tweeted apologies and sent emails to the few remaining staff at FTX. 
"I didn't mean for any of this to happen, and I would give anything to be able to go back and do things over again," he wrote to employees on November 23. 
"You were my family. I've lost that, and our old home is an empty warehouse of monitors. When I turn around, there's no-one left to talk to." 
At one point, Bankman-Fried blamed the whole catastrophe on a woman named Caroline Ellison, the CEO FTX's sister company Alameda and his one-time girlfriend. 
In a text exchange with a Vox reporter, he claimed that FTX had loaned Alameda $US1 billion in customer funds, believing the company had enough "collateral" to cover it. 
Sidestepping the fact that FTX owns Alameda, Bankman-Fried implied that it was Ellison who had gambled with customers' money and lost it. 
"Sometimes life creeps up on you," he said in a text message. 
The 28-year-old has been living in a luxury compound in the Bahamas with nine housemates, all reportedly executives linked to FTX and Alameda, including Bankman-Fried. 
On social media, she has voiced her support, like Bankman-Fried for the global philanthropic movement effective altruism. 
After FTX imploded, the man appointed to clean up the company's mess, John J Ray III, fired several top executives, including Ellison. 
Ray, one of the most experienced restructuring executives in the world, who led disgraced US company Enron through its bankruptcy proceedings, was scathing of FTX's management. 
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," he said in an affidavit.
Ray said FTX was in the hands of a "very small group of inexperienced, unsophisticated and potentially compromised individuals" who used corporate funds to buy lavish Bahamas property and other "personal items". 
Stripped of his celebrity friends, his billionaire status, and his oft-repeated claim that he could save the world, Bankman-Fried was responsible for "one of the most abrupt and difficult collapses in the history of corporate America," FTX lawyer James Bromley said. 
"The emperor had no clothes," he added. 
While Bankman-Fried's location has not been confirmed, it's believed he's still inside the Bahamian compound he once shared with his FTX colleagues. 
As authorities in the Bahamas and the US circle, he faces multiple criminal investigations and could be hauled before the United States Congress this month. 
There are now fears a contagion has been unleashed on the crypto market, with lender BlockFi filing for bankruptcy, blaming its "significant exposure" to Bankman-Fried's FTX collapse. 
FTX customers are waiting to see if they'll ever see a cent, while the jewel in Bankman-Fried's effective altruism crown, the FTX Future Fund, is unlikely to honour its promised donations.
Whether Bankman-Fried and his associates were responsible for one of the greatest crimes in US corporate history or were simply in over their heads, another American billionaire's house of cards has collapsed, dashing the hopes, futures, and financial security of many others. 
Speaking to a financial news summit on Wednesday, the disgraced entrepreneur told the New York Times host he didn't "knowingly commingle funds" and that he "didn't know exactly what was going on". 
"Clearly I made a lot of mistakes, or things I would do anything to be able to do over again. I didn't ever try to commit fraud on anyone," he said via video call from his Bahamian bunker. 
While crypto proponents describe Bankman-Fried as an outlier in an emerging and exciting market, Professor Allen says the industry is ripe for exploitation and fraud. 
"Complexity and opacity are often harnessed by fraudsters, the more complex and the more opaque something is, the easier to hide from people," she said. 
"[In crypto] we have the complexity of finance overlaid with technological complexity, all wrapped up in this techno-utopian ideal of 'this is the future'. 
"I don't think it's fair to say that this is one rotten apple in crypto, especially considering how many times we've seen it happen. 
"The promises of something that's too good to be true, turned out to be too good to be true." 
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