$24b to zero: Sam Bankman-Fried’s fortune dissolves in days - November 14, 2022

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The entire $US16 billion ($24 billion) fortune of former FTX co-founder Sam Bankman-Fried has been wiped out, one of history’s greatest-ever destructions of wealth.

The downfall of his crypto empire – which filed for bankruptcy on Friday along with his resignation – means assets owned by the mogul once likened to John Pierpont Morgan have become worthless. At the peak, the 30-year-old was worth $US26 billion, and he was still worth almost $US16 billion at the start of last week.

The Bloomberg Billionaires Index now values FTX’s US business – of which Bankman-Fried owns about 70 per cent – at $US1 because of a potential trading halt, from $US8 billion in a January fundraising round. Bankman-Fried’s stake in Robinhood Markets valued at more than $US500 million was also removed from his wealth calculation after Reuters reported it was held through his trading house, Alameda Research, and may have been used as collateral for loans. FTX.US and Alameda were also part of the bankruptcy filing.

In announcing it was filing for Chapter 11 bankruptcy, FTX said Friday in a statement that Bankman-Fried has resigned as chief executive officer and will be succeeded by John J. Ray III. Ray, a turnaround and restructuring expert, previously served senior roles in bankruptcies including Enron’s. The initial filings offered no explanation for the firm’s downfall.

More than 130 entities tied to FTX.com, FTX US and trading firm Alameda Research Ltd. were listed in filings at federal court in Delaware, with the Alameda petition listing assets and liabilities of at least $US10 billion each. That easily makes it the biggest bankruptcy in the US this year, affecting investors and other counterparties globally.

“It’s such an unfortunate, stunning and shocking moment for the industry,” Owen Lau, analyst at Oppenheimer & Co. said. “There will be a lot of angry investors, angry customers and angry regulators around the world.”

Employees are expected to continue with the company and “assist Ray and independent professionals” during bankruptcy.

Bankman-Fried’s empire crumbled this week after a liquidity crunch at one of its affiliates. Its US exchange, FTX.US, said on Thursday that customers should close out any positions they want to and that trading may be halted in a few days. In the Bahamas, where FTX.com is based, authorities froze the assets of its local trading subsidiary and related parties.

It’s possible Bankman-Fried owns assets not tracked by the Bloomberg index. Alameda made about $US1 billion in profits last year and FTX made hundreds of millions more.

Tech news website The Information reported on Thursday that he had more than $US500 million invested in funds managed by Sequoia and other venture capital firms, and was also an investor in media startup Semafor. But if those assets are held through Alameda they might be wiped out by its losses.

For his part, Bankman-Fried is being investigated by the US Securities and Exchange Commission for potential violations of securities rules, a person familiar with the matter said.

The Bahamian police said they’re working with the Bahamas Securities Commission to investigate whether there was any criminal misconduct in the collapse of FTX.

Bankman-Fried was interviewed by Bahamian police and regulators on Saturday, according to a person familiar with the matter. In the Bahamas, law-enforcement inquiries don’t necessarily mean someone will be arrested or charged with a crime.