Is Sam Bankman-Fried crypto’s JP Morgan?

With cryptocurrencies suffering a massive drawdown last month, a curly-haired 30-year-old crypto billionaire stepped in to save the market from further collapse in a flurry of actions that have drawn comparisons to another titan of industry from the 20th century.

His name: Sam Bankman-Fried, the co-founder and CEO of FTX, a Bahamas-based crypto exchange platform valued at $32 billion. He is also the founder of the crypto trading firm Alameda Research, through which he manages assets. 

According to Forbes, Bankman-Fried’s net worth is an estimated $20 billion.

And amid the latest crypto market meltdown – which has seen Bitcoin worth less than half of what it was at the start of 2022 and Ethereum tumble by more than 70 percent during the same period – he has become the lender of last resort for the industry.

In June, as the liquidity crunch from the fallout of crypto hedge fund Three Arrows Capital – which invested heavily in two digital currencies, TerraUSD and Luna, which collapsed in May – sent shock waves through the market, FTX doled out credit lines worth $250 million to lending platform BlockFi, which had an unnamed large client failing to meet obligations on a margin loan.

Then there was Voyager Digital, the crypto broker that disclosed a $660 million potential bad-debt exposure. Alamada, the largest holder of Voyager, loaned it close to $500 million.

And while most crypto companies have been announcing layoffs and cost cuts, FTX has been on a deal-frenzy, agreeing to acquire Bitvo and Embed Financial.

Reports suggest FTX also aims to acquire the investing app Robinhood, in which Bankman-Fried personally has a 7.6 percent stake. FTX has so far denied those claims.

Unlike many of its peers in the industry which grew too quickly without focusing on becoming profitable, the trading platform appears to have been cautious when it comes to its hiring practices.

While leading exchanges Coinbase and Binance had over 4,000 employees at the start of the year and have endured extensive layoffs with the downturn, FTX’s workforce stands at 300. “Because we hired carefully, we can keep growing regardless of market conditions,” Bankman-Fried tweeted.

The new JP Morgan

Weighing in on recent moves by FTX to provide lifelines to other crypto firms during the market’s recent rout, Anthony Scaramucci, founder of SkyBridge Capital, dubbed Bankman-Fried “the new John Pierpont [JP] Morgan”.

“He is bailing out cryptocurrency markets the way the original J.P. Morgan did after the crisis of 1907,” Scaramucci said, referring to a historical analogy of the Gilded Age banker who, at the time before the US Federal Reserve, twice stepped in to prevent economic collapses by pledging his own capital to lead a coalition of wealthy financiers to backstop failing banks, stock exchanges and trust companies.

For his part, Bankman-Fried discussed how he felt a sense of duty to bail out crypto firms in crisis to mitigate retail losses and prevent bad debts from spreading across the sector.

“I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion,” Bankman-Fried told NPR. “Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.”

Over the years, he has acquired firms like Japanese exchange Liquid, which would have gone under after a $100 million hack, and contributed to bailout funds for attacked protocols and projects.

But are they altruistic or an opportunity for a digital asset titan to expand and concentrate more market share in times of distress?

As Daniel Kuhn wrote in an op-ed for CoinDesk, “It’s unclear whether his actions now fall in the former or latter camps: Perhaps he’s intervening today to profit tomorrow.”

Effective altruism

Bankman-Fried describes himself as an “effective altruist” – a philosophy that uses mathematical calculations to determine how people could do the most good with their money and time.

Still driving a Toyota Corolla and living like a university student, Bankman-Fried’s stated goal is to make as much money as possible so he can have more to give away.

In line with that utilitarian ethos, while he worked on Wall Street following his college degree at MIT, he donated 50 percent of his salary every year to animal welfare causes that aligned with his vegan beliefs.

In February, after Russia invaded Ukraine, FTX gave cash to all its Ukrainian users, and he personally donated $250,000 to Ukraine.

The FTX CEO, which he founded in 2019, declared he plans to give away 99 percent of his money to charity.

“You pretty quickly run out of really effective ways to make yourself happier by spending money,” Bankman-Fried told Bloomberg. “I don’t want a yacht.”