Sam Bankman-Fried and the Alameda Research Exchange: Making a Million Dollars to Save the World: How Did Aditya Baradwaj Start FTX?
Aditiya Baradwaj joined crypto-trading firm Alameda Research when it was run out of an anonymous first-floor office in downtown Berkeley, California. It was September 2021, and the day Baradwaj arrived, Sam Bankman-Fried, the company’s founder, was sitting in the middle of the trading floor playing League of Legends. Bankman-Fried was much more than a billionaire at that time. FTX, an exchange started in January of this year, has more than a million customers. FTX’s latest funding round, in July 2021, had raised nearly $1 billion from A-list investors that included Sequoia and SoftBank.
Bankman- Fried was an unlikely role model for the industry, a mop-haired academic who was on screen with a kind of sarcastic anti-charismatic that set him apart. He was also, famously, a proponent of effective altruism—a philosophy that espouses making money to give it away. He was making Billions of dollars to save the world, and that was compelling to him. “It’s kind of a noble mission,” Baradwaj says. It is contrary to the purpose of a lot of trading firms who are just trying to make money.
Within months, Baradwaj was on FTX’s rocket ship. Bankman-Fried and FTX were moving their operation to Nassau from Hong Kong, while Alameda had its headquarters in Hong Kong. The staff were moving between the two. There were parties and conferences with celebrities and political leaders that helped cement the companies’ status. Sam was on the cover of Forbes. Everyone was saying he was a genius. “It made it very easy to believe that we were part of something really unique and special, and that it was going to keep going, and it was never going to end.”
I think it is fair to ask, How could Sam and others have deceived so many people, including people who are closest to them? Baradwaj says. Think about the investors who invested in FTX and poured hundreds of million of dollars into the enterprise, because they were given access to all of the company’s financials. I think that tells you something about the reality distortion field that a lot of these figures can have around them.”
Silicon Valley could be said to be in the business of reality distortion. Fundraising for startups can be as much about narrative as about economic fundamentals. Most venture capital portfolios are filled with companies that will fail because their model is wrong, their product won’t land, their vision of the future won’t pan out. Everyone is in search of the one thing that will help them reach escape velocity. Everyone is searching for a Steve Jobs or Jeff Bezos success. That creates a degree of hunger—even desperation—that can be exploited by someone who arrives with a great story at the right moment.
Sam Bankman-Fried’s FTX Trial: Here’s What You Need to Know (and Why You Can’t Tell Us)
On Tuesday, Bankman-Fried’s high-profile trial will get underway. Federal prosecutors have accused him of defrauding customers and investors, and charged him with money laundering. If he is convicted on all seven criminal counts, the former crypto executive could be sentenced to more than 100 years in prison.
The trial marks a hard fall from grace for a crypto mogul who hobnobbed with celebrities, including model Gisele Bündchen, former President Bill Clinton, and and actor Orlando Bloom, during FTX’s heyday.
Bankman-Fried started FTX in 2019, and before long, the company was valued at an eye-popping $32 billion. One of the largest criptom exchanges in the world was run by the company.
Prosecutors allege Bankman-Fried and other former FTX executives used customers’ money without their knowledge to plug a multibillion-dollar hole in the hedge fund’s balance sheet.
Two financial regulators, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, have brought parallel suits against Bankman-Fried, alleging similar misconduct.
Kaplan sent the former FTX CEO there after Bankman-Fried violated the terms of his bail. He used a virtual private network without the court’s permission and showed The New York Times private writings of Bankman- Fried’s ex-girlfriend, and also contacted a former colleague with an encrypted messaging app.
Michael Lewis has been writing about Bankman-Fried’s rise and fall as the author of a book that is hitting store shelves on Tuesday.
If the mogul loses his internet access for a long period of time, he may go insane, according to Lewis in the ’60 Minutes’ interview.
“If you gave Sam Bankman-Fried a choice of living in a $39 million penthouse in The Bahamas without the internet, or the Metropolitan Detention Center in Brooklyn with the internet, there’s no question in my mind he’d take the jail,” Lewis said.
Sam Bankman-Fried’s trial is about to start: Why you need to know if it’s a case of lying and stealing, and how to make it simple
According to Tarek Helou, a lawyer in private practice who spent more than a decade at the Department of Justice, there is a mantra among federal prosecutors: “Thin to win.”
The case is novel due to the company doing business in the new world of CRYPTO. According to Helou, prosecutors will want to make sure that the case is simple and straightforward.
The Justice Department will not say that it is about cryptocurrencies. “They’re going to simplify it, and say that it’s just a case about lying and stealing.”
“I didn’t ever try to commit fraud on anyone,” Bankman-Fried told The New York Times days before he was arrested. “Clearly, I made a lot of mistakes that are things I would give anything to be able to do over again.”
FTX was headquartered in The Bahamas, where employees and executives, many of whom were in their 20s, lived together in a $30 million penthouse as they ran a sprawling business.
After Bankman-Fried was arrested last December, she pleaded guilty to several fraud counts, and three other executives did the same.
In addition to them, both sides have asked to call expert witnesses, and in a recent court filing, prosecutors said they plan to put FTX customers on the stand.
Source: FTX founder Sam Bankman-Fried’s trial is about to start. Here’s what you need to know
A Twitter friend of Bankman-Fried, whose case he tried before he was released from a federal magistrate’s probation
He used X, formerly known as Twitter, and started a newsletter on Substack. Bankman-Fried invited journalists to visit him at his parents’ house where he had been placed initially after posting bail, and prosecutors say Bankman-Fried had around 1,000 phone calls with reporters.
The judge decided in August to revoked Bankman- Fried’s bail because he talked openly about his case.
“He’s an experienced, very well-respected judge,” says Joshua Naftalis, an attorney with the law firm Pallas, who tried a case before Kaplan when Naftalis was a federal prosecutor. He has control of both sets of parties. He runs a courtroom efficiently.