Meet The World’s Richest 29-Year-Old: How Sam Bankman-Fried Made A Record Fortune In The Crypto Frenzy
( Guerin Blask for Forbes )
FTX cofounder Sam Bankman-Fried has amassed $22.5 billion before turning 30 by profiting off the cryptocurrency boom – but he’s not a true believer. He just wants his wealth to survive long enough to give it all away.
STEVEN EHRICH : ". . .Four years ago, Bankman-Fried had yet to buy a single bitcoin. Now, five months shy of his 30th birthday, he debuts on this year’s Forbes 400 at No. 32, with a net worth of $22.5 billion. Save for Mark Zuckerberg, no one in history has ever gotten so rich so young. The irony? Bankman-Fried is no crypto evangelist. He’s barely even a believer. He’s a mercenary, dedicated to making as much money as possible (he doesn’t really care how) solely so he can give it away (he doesn’t really know to whom, or when). . .
At the moment, Bankman-Fried’s “effective altruism,” the utilitarian-inflected notion of doing the most good possible, is almost entirely theoretical. So far, he has given away just $25 million, about 0.1% of his fortune, placing him among the least charitable members of The Forbes 400. He’s betting that he’ll eventually be able to multiply his giving by a factor of at least 900 by continuing to ride the crypto wave instead of cashing out now. . .Bankman-Fried’s cryptocurrency exchange, FTX, which enables traders to buy and sell digital assets such as bitcoin and Ethereum, raised $900 million from the likes of Coinbase Ventures and SoftBank in July at an $18 billion valuation. It handles some 10% of the $3.4 trillion face value of derivatives (mostly futures and options) traded by crypto investors each month. FTX pockets 0.02% of each of those trades on average, good for around $750 million in nearly risk-free revenue—and $350 million in profit—over the last 12 months. Separately, his trading firm, Alameda Research, booked $1 billion in profit last year making well-timed trades of its own. Lately Bankman-Fried has been hitting the TV circuit to opine on bitcoin prices, regulations and the future of digital assets.
“It’s a really weird, awkward in-between time for the industry,” he says. “There’s just a lot of uncertainty in half the countries in the world.”
. . . “My goal is to have impact,” he says. But to get there, Bankman-Fried, who moved to Hong Kong in 2018 and to the Bahamas in September, will have to survive increasing government attention and outflank an army of competitors vying for the business of more than 220 million traders worldwide—all while braving the boom-and-bust crypto cycles that can spawn great fortunes at historic speeds yet level them just as quickly. . .
BLOGGER NOTE: Here's some about family history and education. Just enough to get you started and to encourage you to read more of the reporting in Forbes:
'The son of two Stanford law professors, Sam Bankman-Fried grew up reading Harry Potter, watching the San Francisco Giants and listening to his parents talk politics with West Coast academics.
> After graduating from a small private Bay Area high school that, he says, “would have been really great if I were more hippie-ish and liked science less,” he enrolled at MIT, where he “half-assed” his way through a physics degree, spending more time playing video games Starcraft and League of Legends than studying.
> He figured he might become a physics professor. But he was fundamentally more interested in ethics and morality. “There’s a chicken tortured for five weeks on a factory farm, and you spend half an hour eating it,” says Bankman-Fried, who is a vegan. “That was hard for me to justify.”
> He read deeply in utilitarian philosophy, finding himself especially attracted to effective altruism, a Silicon Valley–esque spin on philanthropy championed by Princeton philosopher Peter Singer and favored by folks like Facebook cofounder Dustin Moskovitz.
> The basic idea: Use evidence and reason to do the absolute most good possible. Typically, people give to trendy causes or those that have affected them personally. An effective altruist looks to data to decide where and when to donate to a cause, basing the decision on impersonal goals like saving the most lives, or creating the most income, per dollar donated.
> One of the most important variables, obviously, is having a lot of money to give away to begin with. So Bankman-Fried shelved the notion of becoming a professor and got to work trying to amass a world-class fortune.
“I got involved in crypto without any idea what crypto was,” he says. “It just seemed like there was a lot of good trading to do.”
In late 2017 he quit his job and launched Alameda Research, a quantitative trading firm, with about $1 million from savings and from friends and family. He set up shop in a Berkeley, California, Airbnb with a handful of recent college grads and began working the arbitrage trade, hard. Sometimes his entire staff would have to stop work to swarm foreign-exchange websites because they couldn’t convert Japanese yen to dollars fast enough. At its peak, in January 2018, he says he was moving up to $25 million worth of bitcoin every day.
But he soon grew frustrated with the quality of the major crypto exchanges. They were geared toward making it easy for individuals to buy and sell a few bitcoins, but they were in no way equipped to handle professional traders moving large sums at rapid speeds. Sensing his moment, he decided to start his own exchange. . .
Bankman-Fried’s aim: to position his risk-taking two-year-old financial firm as something safe and mature. If your company becomes part of everyday discourse, it’s much harder for politically sensitive regulators to shut you down.
[ NOTE ] It’s a playbook written by PokerStars during the first great online gambling boom, which peaked around 2010, and later adopted by sports gaming outfits FanDuel and DraftKings.
He also wants to move beyond crypto.
> Last year, he steered FTX into prediction markets, which let traders bet on the outcome of real-world events like the Super Bowl and presidential elections.
> He’s eyeing broader expansion, too: The hope is that one day customers will be able to buy and sell everything from an Ethereum call option to a share of Microsoft or a mutual fund on FTX.
“There’s a wide world out there,” says the single biggest beneficiary of the crypto boom. “We shouldn’t think that crypto is going to be the most fertile ground to work in forever.”
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