FTX co-founder Sam Bankman-Fried was riding high for several years with his company rapidly growing market share in the cryptocurrency space. The increase in valuation for FTX helped Bankman-Fried’s wealth increase and also led to partnerships and deals with sports teams and athletes around the world.
During the crypto winter, Bankman-Fried was painted as a savior and earned comparisons to famous banker J.P. Morgan and legendary investor Warren Buffett thanks to rescuing and acquiring companies.
Once seen as a white knight for cryptocurrency, Bankman-Fried is now in need of his own white knight to save his struggling company.
What Happened: Founded in May 2019, FTX quickly rose up the rankings of cryptocurrency platforms and gained market share, potentially at the expense of companies like Binance, Coinbase Global Inc COIN and Robinhood Markets Inc HOOD.
FTX and Bankman-Fried gained share and valuation for the company, which led to strong leverage to get deals done as others struggled during the crypto bear market of 2022.
Earning comparisons to John Pierpont Morgan, better known as J.P. Morgan, for bailing out cryptocurrency companies during the bear market, Bankman-Fried said earlier this year the market had seen “mixed” results.
FTX spent around $1 billion to help struggling companies, but not all of the investments have turned into wins for the company, Bankman-Fried said in an interview on Bloomberg’s “David Rubenstein Show: Peer-to-Peer Conversations.”
“I think some were going to turn out to be profitable, some won’t be. We had to make snap judgment calls,” Bankman-Fried said.
FTX reached deals with Voyager Digital, BlockFi and others providing lifelines and also creating potential strong returns for Bankman-Fried’s company buying assets on the cheap.
Bankman-Fried said he welcomed the comparisons to J.P. Morgan, the man responsible for the early days of JPMorgan Chase & Co JPM and helped loan money to companies during the 1907 banking crisis.
“It doesn’t bother me too much. I think it’s something I thought was the right thing for the industry,” Bankman-Fried said.
Bankman-Fried said the goal was to do ok deals and not make a fortune supporting the industry.
“Your goal is for us to not get our faces ripped off. But contingent on that, you know, do as much as we can to bail out the industry.”
Along with comparisons to J.P. Morgan, Bankman-Fried was dubbed “the next Warren Buffett” in August by Fortune.
“The 30-year-old billionaire Sam Bankman-Fried is betting big on crypto in a moment of crisis. He could build an empire like the Oracle of Omaha — or crash and burn,” the Fortune cover said.
Bankman-Fried earned comparisons to Buffett, the CEO of Berkshire Hathaway Inc BRKABRKB, thanks to a belief from the legendary investor, who has often said to be “greedy when others are fearful.”
As the cryptocurrency market saw several companies face liquidity issues and bankruptcies, Bankman-Fried swooped in to acquire on the cheap. Bankman-Fried was asked about the comparisons to Buffett as the owner of several companies and potentially being owed favors.
“The bigger piece of this, frankly, is a trust thing where I don’t want to have to worry when I’m doing a deal about whether the other side is going to try and f*** me in 20 ways I’m not anticipating,” Bankman-Fried told Fortune.
Bankman-Fried said the goal was to work together with struggling companies.
“Lack of trust is an enormous transaction cost, and I underestimated this when I first got into business.”
Related Link: Analysis: A Tweet Just Cost Investors $153 Billion, How CZ May Have Tanked FTX, Crypto Before Acquisition
What’s Next: The list of companies that have seen investments from FTX and Bankman-Fried include BlockFi, Robinhood, Voyager Digital, Good Luck Games, Liquid and Bitvo.
While others in the cryptocurrency space were preserving cash to weather the crypto bear market, FTX shelled out billions to push forward the industry and the company’s growth potential. The moves helped Bankman-Fried earn comparisons to Morgan and Buffett and was also seen as a white knight for the sector.
A potential feud between Bankman-Fried and Binance CEO Changpeng "CZ" Zhao over calls for regulation of the cryptocurrency market may have led to the sinking of the FTX token FTT/USD.
The FTX token and other cryptocurrencies fell drastically over the past two days, resulting in liquidity issues at FTX. The fiasco led to Bankman-Fried turning from being a white knight to needing one to help his struggling company.
FTX announced Tuesday it had reached a deal with Binance that would see the FTX.com business acquired by its rival. Zhao said Tuesday his company had the power to walk away from the deal at any time, something being reported Wednesday that could be a reality.
Without Binance, Bankman-Fried will likely seek another partner or acquirer to help save his company.
Bloomberg reported Bankman-Fried’s wealth dropped an estimated 94% Tuesday going from $15.6 billion to $1 billion.
While it’s still too early to tell where this story ends, the comparisons to Buffett may have been premature and as Fortune once said, may instead end with Bankman-Fried and FTX crashing and burning.
Read Next: Robinhood Shares Jump On Investment From FTX Founder Sam Bankman-Fried
Photo: Sam Bankman-Fried, Wikimedia; Knight, Rick Partington by Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
