There’s a theory that Sam Bankman-Fried wants to become the king of crypto.
There’s another that says the billionaire CEO of the FTX exchange sees crypto as a stepping stone on the way to Wall Street.
That latter one started getting taken seriously fairly recently, when Bankman-Fried was rumored to be thinking of buying stock and crypto trading firm Robinhood outright after snapping up a 7.6% stake — an offer he carefully said he hadn’t made but didn’t deny considering.
But the former one took a big step towards reality — or maybe confirmation is a better word — when Bloomberg News revealed today (Aug. 12) that he is in talks to buy a 60% stake in the Huobi cryptocurrency exchange.
With a 24-hour trade volume of $1.51 billion, FTX is the third-largest crypto exchange, according to CoinGecko. Add in No. 6 Huobi Global’s $1 billion (if combined, which would be further down the road), and Bankman-Fried would control the second-largest spot crypto exchange. FTX is already the No. 2 crypto derivatives exchange — although in both categories he’s far behind Changpeng “CZ” Zhao’s Binance.
However, he’s buying up a lot more than Zhao as the crypto winter’s collapsing prices and a string of bankruptcies that flowed from a stablecoin’s $48 billion collapse in May have combined to put a lot of bargains on the table.
Huobi would be far and away Bankman-Fried’s biggest purchase — CEO Leon Li is said to be seeking a valuation as high as $3 billion, Bloomberg said — but not its only one in the cryptoverse.
Not everyone is a fan of his ambitions.
“It’s dangerous for the whole industry to have connections to FTX,” Elliot Chun, a partner at crypto buyout and advisory firm Architect Partners, told Bloomberg last month. “That typically is not good for a free-market scenario, particularly the free markets that crypto enthusiasts embrace.”
Bankman-Fried’s empire has three main arms: FTX, which doesn’t operate in the U.S., the far smaller FTX US and the investment firm Alameda Research.
FTX US acquired Embed, a well-licensed stock clearing firm, in June, as well as leading hardware wallet maker LedgerX and game makers Good Luck Games. It also recently launched a non-fungible token marketplace, FTX NFTs.
It also made a high-profile investment-to-buy deal in BlockFi, saving the crypto lender from bankruptcy with a loan that set Bankman-Fried up with the ability to buy the firm outright while reportedly cutting out all existing investors. And FTX US has also discussed acquiring crypto miners.
FTX proper has acquired Japanese exchange Liquid, Canadian crypto exchange Bitvo, and Blockfolio, a portfolio tracker-turned-trading-app now renamed s FTX App — as well as launching FTX Ventures, a venture capital firm.
It also has investments in three blockchain protocol developers — LayerZero, NEAR protocol, and Aptos Labs — as well as Web3 gaming company Metatheory.
The third arm is Alameda Research, the quant trading firm where the former Jane Street Capital trader made his first fortune. Alameda was involved with two bankrupt lenders: Celsius and Voyager Digital. He loaned Voyager $500 million as it struggled — unsuccessfully — to stay out of bankruptcy and later made what its CEO angrily described as a “low-ball” buyout offer.
Both will likely end up in losses, which Bankman-Fried has repeatedly said — without much modesty — he is willing to take by trying to bail troubled crypto firms out for the good of the industry. He has been anointed crypto’s “lender of last resort.”
Alameda has four other investments: the NFT marketplace Magic Eden, crypto bank and institutional trading and custody firm Anchorage Digital, DeFi staking protocol Lido, and payments cryptocurrency developer MobileCoin.
Bankman-Fried has moved to have FTX proper move into stock trading, taking a stake in the “small but influential” exchange IEX, New York magazine noted, and buying the well-licensed clearing firm Embed and mobile stock app Delphia.
“To put it another way, a billionaire who has stakes in two exchanges, a hedge fund, a brokerage, and a clearing corporation is now mulling buying the brokerage outright,” the magazine noted on its Intelligencer blog.
With the May launch of FTX Stocks, he is trying to make his firm into an “everything exchange” with an “everything app.”
At its launch, FTX US President Brett Harrison said, “we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface.”
Playing the Part
Bankman-Fried — increasingly known as “SBF” — “has been able to seize the throne of crypto king, even becoming something of a meme himself” New York noted, as his shock of curly hair and insistence on wearing a T-shirt and often-khaki shorts become better known.
He’s been pictured in a suit exactly once in recent years — when he testified before Congress — but in industry settings, he’s never out of uniform. Even when onstage alongside former President Bill Clinton and supermodel Gisele Bündchen, who along with her husband, star quarterback Tom Brady, is a spokesperson for FTX.
Then there’s his political profile, which went from zero to 60 two years ago when a $5 million donation to the Biden campaign made him one of its top political donors overnight. He’s since reinforced that by starting a (non-crypto) super PAC, Protect Our Future, for the 2022 election cycle and more generally by taking a hands-on approach to lobbying
“His ambition knows no bounds at this point,” Chris McCann, a general partner at VC firm and early FTX investor Race Capital, told Bloomberg. “He’s not doing this out of the goodness of his own heart.”