Get All Access for $5/mo

Who Is FTX Founder Sam Bankman-Fried and What Did He Do? Everything You Need to Know About the Disgraced Crypto King Sam Bankman-Fried has been charged with committing "one of the biggest financial frauds in American history."

By Sam Silverman

Key Takeaways

  • Federal prosecutors dropped a campaign finance charge on Wednesday, July 26, per CNBC, in the latest develop concerning the impending fate of Sam Bankman-Fried.
  • The charge were dropped after prosecutors failed to get permission to do so from the government of the Bahamas when Bankman-Fried was first extradited in December.
  • A charge for violating anti-bribery statutes was also dropped on the same basis.

Opinions expressed by Entrepreneur contributors are their own.

Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images

Note: Although Sam Bankman-Fried is out on bail while he awaits trial, the disgraced crypto entrepreneur's temporary freedom may be in jeopardy.

  • At a bail hearing in New York on February 16, prosecutors asked a New York judge to restrict SBF's access to technology after they accused him of using a VPN (virtual private network), according to CNN.
  • The request came after they told the court that Bankman-Fried had allegedly contacted a former FTX employee who is a potential government witness. The judge suggested that his bail could "conceivably" be revoked if SBF violated the terms of his bail. However, the defense is calling in a security expert to advise as they argue that SBF's freedom release is essential for them to prepare their case.
  • The court is expected to reconvene on Tuesday with a proposal from the defense.

Sam Bankman-Fried started the cryptocurrency exchange FTX in 2019 and watched it all come crashing down in 72 hours.

FTX attracted major investors including SoftBank and BlackRock and boasted celebrity endorsements from the likes of Tom Brady and Shaquille "Shaq" O'Neal. Still, the company's low-risk, high-reward business model appeared almost too good to be true. And it was.

In the wake of the FTX collapse, between $1 billion and $2 billion in client money has gone unaccounted for, according to Reuters.

SBF has since been arrested and charged with several counts of fraud, and prosecutors say he orchestrated "one of the biggest financial frauds in American history." He could face up to 115 years in prison.

While the crypto scandal is still unfolding, here's everything to know about Bankman-Fried.

Who Is Sam Bankman-Fried?

Before Sam Bankman-Fried was embroiled in the FTX scandal, he was known as a rising crypto wiz and an academic standout.

Also known simply as "SBF," Bankman-Fried was raised in California by his parents, Joseph Bankman and Barbara Fried, who were both Stanford University law professors, according to Reuters. He excelled in mathematics and went on to graduate from the Massachusetts Institute of Technology (MIT) in 2014.

How Did SBF Make His Money?

After graduation, Bankman-Fried worked for Jane Street Capital in New York City, where he traded currencies, futures, and exchange-traded funds. SBF stayed with the company for three years before leaving to start his own crypto trading firm, Alameda Research, in 2017 when he was 25 years old.

Related: Who Is Caroline Ellison, Stanford Grad and Former CEO of Alameda Research?

Alameda was based in Hong Kong and turned a profit by taking advantage of the price differences in Bitcoin around the world. The company would purchase Bitcoin in Asia and sell it elsewhere, in order to pocket the currency difference, per The New York Times.

Although Alameda operated much like a traditional Wall Street firm, it had no regulatory oversight, which scared investors, the outlet reported. To help generate revenue for Alameda's trades, SBF launched a cryptocurrency exchange, FTX, in 2019, which greatly benefited from the increased demand for crypto.

The company was valued at $32 billion in January 2022, according to CNBC.

SBF discussed crypto regulations and testified in front of Congress in December 2021, detailing his then-supposed willingness to add regulations to the industry, something typically feared by crypto-enthusiasts. Despite facing legal troubles for the FTX collapse, SBF said that helping to regulate the industry is still important to him in an interview with The New York Times.

What Is Sam Bankman-Fried's Net Worth?

Just days before Sam Bankman-Fried's crypto empire collapsed, he had an estimated net worth of $15.6 billion, according to Bloomberg Billionaires Index. After his fortune plummeted, he was left with $1 billion. The 94% drop in his wealth is among the biggest one-day collapses the tracker has ever seen.

At his peak, SBF was worth an estimated $26.5 billion, with most of his money tied up in his companies.

Earlier this year, SBF pledged to give away 99% of his fortune to charitable organizations, and his FTX Foundation has donated over $190 million to several causes including animal welfare and global poverty, according to Vox. SBF also outlined his charitable intentions in a post to the Giving Pledge website, which has since been removed.

Image credit: Jeenah Moon/Bloomberg via Getty Images

What Is FTX and What Went Wrong?

FTX is a cryptocurrency exchange platform that worked in close collaboration with Alameda Research.

In addition to charging customers to trade on the platform, FTX created the FTT token, which was mainly bought and sold by Alameda on the exchange, per The New York Times. As the token's main market marker, it was allowed to set the price for the token at a big discount, attracting people to the platform with promises of a high return on their investment.

The business model attracted major investors including Softbank and Blackrock, in addition to several celebrity entrepreneurs, including Gwyneth Paltrow and baseball star David Ortiz.

However, FTX's close workings with Alameda went under the radar, including SBF's reported romantic relationship with Caroline Ellison, who worked as Alameda's co-CEO with Sam Trabucco.

According to an SEC filing, Ellison said she and others were aware Alameda had been using FTX customer funds.

"During a meeting with Alameda employees on or about November 9, 2022, Ellison admitted that she, Bankman-Fried, Wang, and Singh were aware that FTX customer funds had been used by Alameda," the complaint reads.

Ellison and FTX co-founder Gary Wang later pledged guilty to several charges including wire fraud, securities fraud and commodities fraud, according to AP News.

Together, FTX and Alameda provided billions in funding to 246 crypto companies, but despite SBF's push for more crypto, investors started to back out as a result of fluctuating crypto prices and withdrew funds from their accounts.

As Alameda struggled to pay back its lenders, it began to use customer funds deposited in FTX to pay back its investors. FTX reportedly lent an estimated $10 billion of customer funds to Alameda.

Then, in a last-ditch effort to save Alameda, Binance proposed a deal to buy the company, but it fell through after analyzing FTX's books, according to The New York Times. After Binance's CEO Changpeng Zhao announced he would sell his FTT tokens due to fears concerning the company's financial stability, he sparked panic and traders withdrew $6 billion from the platform in just 72 hours.

The bank run exposed an $8 billion hole in FTX and Alameda's accounts.

After struggling to raise more capital for the business, FTX filed for bankruptcy on November 11, 2022. SBF announced he's be stepping down as CEO that same day and would be replaced by lawyer John J. Ray III.

What Did Sam Bankman-Fried Do and Why Was He Arrested?

U.S. prosecutors have accused Sam Bankman-Fried of defrauding FTX customers by misappropriating funds to pay debts and expenses for its sister company Alameda Research. According to prosecutors, SBF also provided false and misleading information to investors, in addition to attempting to hide his earnings through wire fraud, according to The New York Times.

SBF was arrested in the Bahamas at his apartment complex after the United States filed criminal charges against him on December 12, stating they were "likely to request his extradition," the government of the Bahamas said in a statement to the outlet. He is facing criminal charges of wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.

Additionally, the Securities and Exchange Commission has authorized charges "relating to Mr. Bankman-Fried's violations of our securities laws."

What Is Sam Bankman-Fried Saying in the Wake of the FTX Collapse?

After FTX imploded, Sam Bankman-Fried has been vocal about what transpired.

Just one day before the company filed bankruptcy, SBF took to Twitter to issue a public apology.

Additionally, he suggested that poor internal organization contributed to their inability to return funds to customers.

Furthermore, SBF said he "did not ever try to commit fraud" at the DealBook Summit on November 30, stating he "screwed up" and failed to protect his customers. He claims to have been truthful following the FTX fallout, stating, "I don't know of times when I lied."

He went on to issue an interview with The New York Times, telling the outlet, "It could be worse." He explained that he didn't realize how much borrowing was going on between FTX and Alameda, and the significant risk it posed. Additionally, SBF blamed himself for not seeing trouble ahead.

"Had I been a bit more concentrated on what I was doing, I would have been able to be more thorough," he said. "That would have allowed me to catch what was going on on the risk side."

Prior to his arrest, SBF told the NYT he was "working constructively with regulators, bankruptcy officials, and the company to try to do what's best for consumers."

Image credit: (Photo by Mario Duncanson / AFP) (Photo by MARIO DUNCANSON/AFP via Getty Images)

What Is Next for Sam Bankman-Fried?

Following his arrest, Bankman-Fried was sent to Fox Hill prison in Nassau, Bahamas, and was denied bail. After agreeing to be extradited to the U.S., he was flown from the Bahamas to New York in late December 2022.

At his first U.S. court appearance, a judge agreed to release SBF on a $250 million bond after he agreed to waive extradition. Additionally, he can live under house arrest at his parents' California home as he awaits trial.

On January 3, 2023, he pleaded not guilty to eight criminal charges, including several counts of fraud and money laundering.

In addition to the criminal charges SBF is facing, he is also dealing with a class action lawsuit claiming that the celebrities who endorsed FTX, including Kevin O'Leary and Gisele Bundchen, were engaging in deceptive practices to "induce confidence and to drive consumers to invest in what was ultimately a Ponzi scheme," according to the lawsuit.

It's possible SBF could work out a deal that includes both his criminal and civil cases, Reuters reported. Additionally, prosecutors will ask for restitution for those who lost money in the collapse.

Prior to Bankman-Fried's arrest, he was supposed to testify in front of the House Financial Services Committee about the FTX collapse.

"The American public deserves to hear directly from Mr. Bankman-Fried about the actions that've harmed over one million people," Representative Maxine Waters, who chairs the committee, said in a statement, per NYT. "The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity."

The hearing went ahead without SBF, and FTX's new CEO John Ray spoke in his place. He called the relationship between Alameda and FTX "old-fashioned embezzlement" and blamed the collapse and financial fallout on the "absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company entrusted with other people's money or assets."

His testimony went on for four hours, stating he is in the process of getting to the bottom of the scandal and figuring out how to repay lenders and customers. However, the unorganization at FTX has made that a challenge.

"Even with most failed companies, we have a fair roadmap of what happened," Ray said, adding, "We're dealing with a literal paperless bankruptcy."

When asked what role SBF would play in the company going forward, Ray responded: "Zero."

As of late, FTX said they have located over $5 billion in cash and other assets, and they plan to sell over $4.6 billion in additional holdings to help recoup customer funds, The Wall Street Journal reported. According to court documents, it's unclear how much in crypto and cash will be discovered.

However, despite finding billions, FTX also revealed they've lost $415 million in cryptocurrency to hackers since filing for bankruptcy in November, per Reuters.

Additionally, FTX's new management is asking for millions of dollars in charitable and political donations to be returned, although this could be problematic as many of the funds were already spent. Furthermore, a task force has been implemented to look into restarting

Sam Silverman

Content Strategy Editor

Sam Silverman is a content strategy editor at Entrepreneur Media. She specializes in search engine optimization (SEO), and her work can be found in The US Sun, Nicki Swift, In Touch Weekly, Life & Style and Health. She writes for our news team with a focus on investigating scandals. Her coverage and expertise span from business news, entrepreneurship, technology, and true crime, to the latest in entertainment and TV news. Sam is a graduate of Lehigh University and currently resides in NYC. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick


How to Close the Trust Gap Between You and Your Team — 5 Strategies for Leaders

Trust is tanking in your workplace. Here's how to fix it and become the boss your team needs to succeed.


6 Cost-Effective Ways to Acquire Brand Ambassadors

Boost your brand's visibility and credibility with budget-friendly strategies for acquiring brand ambassadors.

Health & Wellness

Get a Year of Unlimited Yoga Class Downloads for Only $23 Through June 17

Regular exercise has been proven to increase energy and focus, both of which are valuable to entrepreneurs and well-known benefits of yoga.

Growing a Business

He Immigrated to the U.S. and Got a Job at McDonald's — Then His Aversion to Being 'Too Comfortable' Led to a Fast-Growing Company That's Hard to Miss

Voyo Popovic launched his moving and storage company in 2018 — and he's been innovating in the industry ever since.

Side Hustle

'The Work Just Fills My Soul': She Turned Her Creative Side Hustle Into a 6-Figure 'Dream' Business

Kayla Valerio, owner of vivid hair salon Haus of Color, transformed her passion into a lucrative venture.

Business Culture

Why Remote Work Policies Are Good For the Environment

Remote work policies are crucial for ESG guidelines. Embracing remote work can positively impact your business and employees.