Jane Street

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By Holly Honderich, Natalie Sherman & Erin DelmoreBBC News

Sam Bankman-Fried has been convicted of stealing billions of dollars from customers of his cryptocurrency exchange FTX. It's a spectacular downfall for Silicon Valley's dishevelled wunderkind, who rubbed elbows with celebrities like Gisele Bündchen and Tom Brady.

On 7 November 2022, as his empire began its dizzying, irrevocable collapse, Bankman-Fried did what he always did: he weighed the odds.

Earlier that day, a rival executive had expressed concerns on social media about the finances of Bankman-Fried's crypto exchange, spooking customers into a multi-billion dollar bank run.

In an online chat, Bankman-Fried consulted two of his top deputies. " To be clear you think the tweet is net bad? " he asked them.

They considered their options. Was it possible that his rival would walk back the criticism? Was it probable that that would stem the bleeding? " Fairly unlikely, " Bankman-Fried wrote.

It was the kind of calculus Bankman-Fried had been making for years, the quick equations friends said he used in nearly every situation - mulling a break-up, assessing a risky trade.

For a while, that approach seemed to work. As the boy-wonder of crypto, Bankman-Fried got rich faster than almost anyone in history, amassing an estimated $26bn in personal wealth, countless magazine covers and sweeping political influence. The flameout was even faster.

The tweet was, as discussed, net bad. Billions gushed out of the platform in less than five days. When it was all over, more than $8bn in customer funds were missing and the company was bankrupt. Five weeks after that, prosecutors in Manhattan charged Bankman-Fried, who had already resigned, with several financial offences including wire fraud, securities fraud, commodities fraud and money laundering.

Over four weeks of trial, two contradictory stories emerged. In one, the former mogul was a brilliant but hapless savant, whose mistakes as CEO allowed for massive fraud to be carried out under his nose. In the other, supported by former members of his inner circle, Bankman-Fried syphoned billions of dollars of customer money, banking on the odds he'd never be caught.

Both tellings reveal how tightly the fortunes of FTX were tied to the image of its founder, whose oddball magnetism drew former presidents, celebrities, and corporate titans into his orbit and his multi-billion dollar gamble.

Bankman-Fried wasn't shy about it: he wanted to get rich. But, to hear him tell it, he wanted to make all those billions just to give them away.

An overachieving child born to two overachieving parents, Bankman-Fried and his younger brother were taught at an early age about utilitarianism, a doctrine holding that the most ethical choice is the one that does the most good for the most people.

As a student at MIT, Bankman-Fried went to a talk by Will MacAskill, a 25-year-old doctoral student at Oxford and founder of effective altruism, a utilitarian-tinged philosophy that uses maths to figure out how individuals can maximise their philanthropic impact.

To do the most good, Mr MacAskill told him, Bankman-Fried could take his considerable intellect to lucrative Wall Street, and donate most of his salary to important causes.

Bankman-Fried was sold. In 2014, he took his degree straight to Jane Street, a high-frequency trading firm, and reportedly gave away about half of his income to worthy causes.

Three years later, Bankman-Fried found an industry that could make him even richer than typical trading: crypto.

At the age of 25, he founded Alameda Research, a crypto investment firm, after noticing that prices of Bitcoin varied considerably in different countries. The arbitrage trading earned Alameda a reported $20m in just three weeks.

In 2019, he founded FTX, then a Hong Kong-based crypto exchange for international investors. Like Elizabeth Holmes - another Silicon Valley billionaire whose star came crashing down - he was able to convince big name investors to lend the company not only cash, but credibility.

Within months, daily trading volume on FTX had reached $300m. By 2021, he had debuted on the Forbes 400, the magazine's annual list of the richest Americans, with a fortune of $22. 5bn.

Some have attributed his remarkable success to an unusually high tolerance for risk, a willingness to chance devastating consequences for a big reward.

" He would be happy to flip a coin, if it came up tails and the world was destroyed, " his ex-girlfriend and former CEO of Alameda Research Caroline Ellison said at trial. " As long as if it came up heads the world would be more than twice as good. "

According to internal accounts, life at FTX could sometimes resemble a grown-up maths camp, filled with a selection of brilliant misfits and led by the perpetually rumpled Bankman-Fried.

" He was super disorganised, he was always in cargo shorts, he was always sloppy, " a former FTX employee told the BBC. " He would walk around the office in bare feet. "

Those at the top were a tight-knit group who sometimes blindly listened to Sam, the employee said. " It could be cult-like. "

Natalie Tien, who handled public relations and Bankman-Fried's schedule at FTX for more than two years, said he was charismatic to the point that the company sometimes felt " toxic".

" We just trusted him 100%, " she told the BBC. " To a degree that we kind of worried [about] speaking up for ourselves. "

It wasn't only people inside the company that were enthralled.

Appearing side-by-side with Bill Clinton, Tony Blair, Gisele Bundchen and Katy Perry in shorts and ill-fitting T-shirts, he became an ambassador of sorts for the crypto industry as whole, just as it began to reach new heights.

Part of the mystique was that Bankman-Fried seemed to eschew the level of luxury his earnings could have afforded. He didn't own a yacht, his defence attorneys said at trial. He drove a beat-up Toyota Corolla. Meanwhile, he testified before Congress arguing for more regulation of the crypto market, setting him apart from many of his peers.

" In a weird way, he seemed kind of like the grown-up in the crypto world, " said Zeke Faux, an investigative journalist and author of Money Go Up: Inside Crypto's Wild Rise and Staggering Fall.

And, of course, there was his stated ultimate objective: Bankman-Fried was going to give it all away.

" It was a great story, everybody loved it, " said Mr Faux. " People loved it in Congress, the VCs loved it, the bankers loved it. "

" The problem with his story is that it was not true, " he said.

In September of 2022, the venture capital firm Sequoia Capital ran a breathless profile of Bankman-Fried in its magazine. At the time, FTX was valued at $32bn.

In the since-deleted piece entitled FTX's SBF Has a Savior Complex, and Maybe You Should Too, author Adam Fisher described Bankman-Fried's efforts to maximise his wealth in order to maximise his impact on the world. It involved a risk, Fisher wrote. " But the math couldn't be clearer. "

" To do the most good for the world, " he said, " SBF needed to find a path on which he'd be a coin toss away from going totally bust. "

A month-and-a-half later, industry news site CoinDesk published a bombshell report alleging that Alameda had over half its $15bn portfolio in FTT - the crypto token printed by FTX. The disclosure raised questions about the actual value of Alameda's holdings, and the apparent conflict of interest between Alameda and FTX - ostensibly independent companies.

Then came that announcement on 6 November from industry rival, Binance CEO Changpeng Zhao, known as CZ, who said he would dump his own sizable stores of FTT.

On 11 November, the implosion of FTX was complete, the story of crypto's prodigy gone with it.

For some observers of the crypto boom, and Bankman-Fried's meteoric rise to power, the fall was not unexpected.

As FTX rose to prominence, the actor Ben McKenzie, best known for his role on the television show the OC, emerged as one of the country's most vocal crypto sceptics.

In July 2022, Bankman-Fried agreed to sit down for an interview with Mr McKenzie for a book the actor was writing, titled Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud.

In a cramped Manhattan hotel room, in an encounter that Mr McKenzie described as " probably the strangest hour of my life" Bankman-Fried tried to pitch the actor on crypto - and Sam Bankman-Fried - as a force for good in the world.

" I think he marketed himself to me as a version of his public persona, which at the time was the California wunderkind, billionaire philanthropist, " Mr McKenzie said.

It was an image that even Mr McKenzie had bought into, to an extent, he said. Until they began talking, that is. " He had trouble just giving me straight answers to basic questions, one of which was, what does crypto currency do? " the actor said.

Over four weeks of trial in Manhattan, Bankman-Fried's attorneys painted their client as a math nerd who was overwhelmed by his expanding empire.

On the stand, now in a suit, with his hair cut short, Bankman-Fried directed some of the blame at Ms Ellison, who had pleaded guilty to fraud, for failing to " hedge" bets to better protect Alameda from a downturn in the market, as he had instructed her to do.

The prosecution, in turn, painted Bankman-Fried as someone whose boundless aspiration went hand-in-hand with a hubris that led Bankman-Fried to play the odds with his company.

" The defendant was gambling with customer money, " prosecutor Nicolas Roos argued.

Bankman-Fried's courtroom downfall was aided by former members of his inner circle, including Ms Ellison, who acted as chief executive of Alameda, as well as college roommates Adam Yedida and Gary Wang, and Nishad Singh, a childhood friend of Bankman-Fried's younger brother.

They testified that while promising to safeguard customer funds and clean up the industry, Bankman-Fried was directing them to commit fraud, opening up a back door between Alameda and FTX so he could use FTX as a personal piggybank. The money fuelled his rise, as he splashed out on property, billions in investments and some $100m in political donations - not to mention helping to cover billions in debts owed by Alameda.

His physical appearance, too, was contrived, Ms Ellison testified - his messy hair and cheap car deemed " better for his image" because it made him look more authentic than a typical trader. But that down-to-earth image belied his intense ambition, she said.

" He thought there was a 5% chance he would become president someday, " Ms Ellison said at trial. " Of the United States. "

While many have watched the trial as a sort of comeuppance, former FTX employee Natalie Tien has looked to it for closure, and is one of the few former employees to attend the trial regularly.

On the one hand, it was a relief to realise that her own doubts and questions about some things - like extravagant spending on celebrity sponsorships - had been justified. The last time she communicated with her former boss, in December 2022, he had just been released on bail and sent her a music video of Eminem, rapping " Without Me " to celebrate.

But the 33-year-old also felt some parts of the story - especially around his schedule and his use of private jets - were being taken " out of context".

" He did lie and he took the money, yes, but I don't think it's because he was greedy, " she said. " Because I actually saw him every day wearing crappy old T-shirts with no shoes and driving a shitty car. "

" It was not an act, " she said.

The last time she communicated with her former boss, in December 2022, he had just been released on bail and sent her a music video of Eminem, rapping " Without Me " to celebrate.

Bankman-Fried now faces up to 110 years in prison, and an indelible reputation as one of the greatest fraudsters in US history. Lawyers working on the bankruptcy case have said they have recovered more than $7bn in missing money.

" I think it says more about us than it does about him, " Mr McKenzie said.

" He got so far, I think, in many ways because of his lineage, because he is the son of Stanford professors, because he did go to MIT, because he worked on Wall Street. The myth of Sam Bankman-Fried grew in relation to the myth of crypto itself, right? "

Downfall of a Crypto King

With additional reporting from James Clayton

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Source of news: bbc.com