Who is Sam Bankman-Fried? Understanding the Founder of FTX, the User-Friendly Cryptocurrency Derivatives Exchange

Last Updated on July 21, 2021

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Sam Bankman-Fried founded FTX a little more than two years ago, launching the crypto derivatives exchange in May 2019.

FTX quickly distinguished itself as the user-friendly exchange, offering functionality and product sophistication to even inexperienced crypto traders. Now Bankman-Friend has discovered, as have coders and Internet visionaries since Bob Metcalfe was working at Xerox PARC, that there is money to be made in rendering the esoteric transparent, and rendering it user-friendly to boot.

FTX has closed a record fundraise ($900 million) valuing the company at $18 billion. This is a considerable jump: FTX was valued at only $1.2 billion a year ago. Forbes estimates that this increases the net worth of Bankman-Fried himself to close to $8 billion.

Who is Sam Bankman-Fried?   

Bankman-Fried was born in 1992 (yes, really), the son of two law professors at Stanford. He got his physics degree (Bachelors) from MIT in 2014. He worked at Jane Street Capital, a quant house, and then co-founded Alameda Research, and became something of an authority from those experiences in the matters of liquidity. 

These days, running FTX seems not to be all-consuming for him, because earlier this year Bankman-Fried launched the Serum project on the Solana blockchain.  The Serum project is a high-speed non-custodial decentralized exchange.

It is a very ambitious project, proposing to “support cross-chain asset swaps, decentralized stablecoins, decentralized oracles, and non-custodial wrapped BTC, BCH, BSV, LTC, ZEC, ETH, and ERC-20s.” The idea behind this is to “scale blockchain for global adoption.” 

More About the Fundraise

In a career that already has its share of highlights, though, this fundraise must earn a prominent place on the reel.  There were over 60 participants. The heavy hitters included Paradigm, Sequoia Capital, Rabbit Capital, Third Point, Lightspeed Venture Partners, Coinbase Ventures, Softbank, the Paul Tudor Jones family, and Van Eck. 

FTX didn’t rely on an investment banker to organize the round. Its team worked directly with the lead investors (Paradigm, Rabbit, and BTIG) to close the deal.

Bankman-Fried has said that the capital wasn’t the “primary goal.” The capital will fund acquisitions, but “the primary goal of the raise was to [find] strategic allies who can help FTX grow its brand.”

Room for Growth for FTX 

In connection with branding it is worth noting that FTX recently entered into a $135 million, 19-year deal for naming rights for the stadium in which the Miami Heat play their home games. Formerly known as the American Airlines Arena, it is now FTX Arena.

The deal was aimed at promoting the company’s U.S. exchange, which is described as offering “a less exotic array of products:” from that of the overseas operation.  

Not just in branding but in value and operational terms there is room for growth yet. Antigua-based FTX is not  yet as large as its most known competitors, Binance and Coinbase. Coinbase has a public-market valuation of above $46 billion. 

And although FTX averages more than $10 billion in daily trading volume, the same number for Binance is above $75 billion.

But FTX has increased its revenues 75 times since its Series A funding round, which closed in mid-2020.  And — to revert to the planned acquisitions mentioned above — FTX is looking to put the raised capital to work buying. Bankman-Fried described the intended purchases as including non-crypto native firms, trading shops, and NFT platforms. In short, it includes business where Bankman-fried and his team “think we have a lot of value to add, implementing the tools that we’ve built, and, frankly, in some cases, us implementing what they’ve built.” 

Sam Bankman-Fried as a Philanthropist

There is a cliché that usually goes at this point in a story about a billionaire. The cliché is that “he believes in giving back,” followed by some reference to charitable giving. To his credit, Bankman-Fried has allowed for a bit of a twist to this ending. He believes in effective giving back, and has given some thought to how to make his donations effective for the ends he wants to advance. “Effective altruism” is not a new idea, but it is good to see billionaires reminding themselves of the realities beyond simply writing checks. 

In that spirit, he supports OpenAI, a research lab hoping to ensure that artificial intelligence benefits our species, and the Nuclear Threat Initiative, aiming to reduce the threat that all the deadline stockpiles (of nukes or of biological agents) could actually be put to use.