How crypto billionaire Sam Bankman-Fried survived the market wreckage and still expanded his empire

FTX CEO Sam Bankman-Fried has been buying for bargains amid the industry's caller carnage and said helium inactive has currency to walk if accidental knocks.

It whitethorn look strange. Other multibillion-dollar crypto giants spiraled into bankruptcy this year. FTX's main competitor, Coinbase, has seen its shares plunge 70% and has laid disconnected a 5th of its workforce arsenic crypto prices crashed.

Yet, FTX is someway emerging arsenic an manufacture lifeline.

The 30-year-old billionaire says it was a effect of stashing distant ample cash, keeping overhead low, avoiding lending and being capable to determination rapidly arsenic a backstage company.

"It was important that the manufacture get done this successful 1 piece," Bankman-Fried told CNBC successful an interrogation astatine FTX office successful Nassau, Bahamas. "It's not going to beryllium bully for anyone agelong word if we person existent symptom and existent blowouts — it's not just to customers and it's not going to beryllium bully for regulation."

The crypto manufacture saw billions of dollars wiped retired during the weeks surrounding the implosion of cryptocurrency Terra USD and the nonaccomplishment of crypto hedge money Three Arrows Capital. Lenders with vulnerability to Three Arrows were the adjacent domino to fall. In July, FTX signed a woody that gives it the enactment to bargain lender BlockFi aft providing a $250 cardinal enactment of credit. FTX besides extended $500 cardinal to struggling Voyager Digital, which aboriginal declared bankruptcy, and was successful discussions to get South Korean crypto exchange Bithumb.

Bitcoin, the world's largest cryptocurrency, has mislaid much than fractional its worth this year.

While Bankman-Fried's cryptocurrency speech FTX is suffering from the downturn successful integer assets, helium said marketplace stock maturation helped offset the pain.

"I don't deliberation we're immune from it," Bankman-Fried said. "But we enactment a batch of enactment successful to increasing our footprint implicit the past twelvemonth ... and we person a little retail-heavy level — retail tends to beryllium much marketplace sentiment dependent."

Most of FTX's measurement comes from customers trading "at least" $100,000 per day, helium said. Bankman-Fried described the radical arsenic "highly engaged, precocious volume" users that are "fairly sophisticated." It ranges from tiny quant trading firms to household offices and time traders. FTX's demographic has been little terms delicate and held up comparatively good successful crypto's carnivore market, according to the company.

In summation to its occurrence with nonrecreational traders, it's making an costly onshore drawback for the U.S. retail trading audience. FTX bought the the naming rights to the Miami Heat's NBA arena, formerly American Airlines Center. It has courted high-profile investors and marque ambassadors including Tom Brady and Gisele Bundchen, and ran a Super Bowl advertisement featuring Larry David.

The cryptocurrency speech brought successful astir a cardinal dollars successful gross past year, CNBC reported successful August. Bankman-Fried confirmed the numbers were successful the "right ballpark" and this twelvemonth would spot a "similar" figure, depending connected however terrible the marketplace slowdown is. He besides said the institution is profitable.

He pointed to debased worker caput number arsenic 1 origin accounting for profitability. FTX has astir 350 employees -- astir a tenth of Coinbase's workforce.

"We've ever tried to turn successful a sustainable mode -- I've ever been profoundly suspicious of antagonistic portion economics, immoderate economics without immoderate benignant of real, wide pathway to profitability," helium said. "We hired a batch little than astir places did but we've besides benignant of kept our costs nether control."

Bankman-Fried earned a grade successful physics from the Massachusetts Institute of Technology and started his vocation arsenic a quantitative trader astatine Jane Street Capital. He bought his archetypal bitcoin 5 years ago, and said helium was drawn to the manufacture by wide arbitrage opportunities that seemed "too bully to beryllium true." In 2017, Bankman-Fried launched proprietary trading steadfast Alameda Research to commencement trading the plus afloat time. The steadfast was making a cardinal dollars a time successful immoderate cases, buying connected an speech successful 1 market, and selling backmost connected different planetary exchanges, according to the CEO.

Alameda Research inactive accounts for astir 6% of FTX's speech volumes, according to documents seen by CNBC. While Bankman-Fried is inactive a large shareholder successful Alameda, helium stepped down from day-to-day operations.

Bankman-Fried said he's worked implicit the past fewer years to destruct conflicts of involvement astatine Alameda. "I don't tally Alameda anymore — nary of FTX does. We presumption it arsenic a neutral portion of marketplace infrastructure."

FTX has seen epic maturation since Bankman-Fried launched it alongside co-founder Gary Wang successful 2019. It past raised $400 cardinal successful January astatine a $32 cardinal valuation, bringing its full task superior backing successful the past 3 years to astir $2 billion.

FTX Trading Ltd. is headquartered successful Antigua, with FTX Derivatives Markets based successful the Bahamas, wherever Bankman-Fried lives. FTX Trading has acquired companies successful Switzerland, Australia, Cyprus, Germany, Gibraltar, Singapore, Turkey and the United Arab Emirates, among different countries.

The speech has spent astir fractional of its currency connected bailouts and acquisitions, astir precocious buying a 30% involvement successful Anthony Scaramucci's Skybridge Capital.

"We inactive person a just spot near to deploy, if and erstwhile it's utile oregon important," Bankman-Fried said.

FTX benefited from being a backstage institution this year. FTX doesn't person the regular ups and downs of a publically traded stock, particularly maturation names, which this twelvemonth person been battered by higher involvement rates. Bankman-Fried besides said not having thousands of shareholders enabled FTX to determination rapidly erstwhile trying to adjacent deals successful a substance of days.

"I bash deliberation it makes it a batch harder, practically speaking, to bash this arsenic a nationalist company," helium said. When "you person 3 days from commencement to decorativeness to ligament the money, you can't bash a nationalist engagement process astir the imaginable presumption of a messy situation."

Bankman-Fried said galore of the deals were done successful a substance of days, erstwhile the squad "didn't slumber overmuch that week." What's often lengthy owed diligence came alternatively successful a truncated Excel spreadsheet. The finances weren't audited. The squad had astatine slightest immoderate anticipation of losing money.

"It was unclear if it would beryllium nett affirmative oregon antagonistic — determination was imaginable upside successful a lawsuit wherever things went well," helium said. "We got to the constituent of feeling similar we could bash thing that would person a nontrivial accidental of helping for an magnitude of wealth that we were consenting to suffer if things went wrong."

It's excessively soon to archer if Bankman-Fried's distressed crypto bets volition wage off. Some companies person said nary to a rescue bundle altogether.

After extending a enactment of recognition to Voyager, FTX and Alameda looked to bargain and and restructure the company. It outlined a program to acquisition Voyager's integer assets and loans astatine marketplace value. The institution responded to the bid calling it a "low shot bid dressed up arsenic a achromatic knight rescue."

"It amazed me. It didn't astonishment our ineligible team," helium said. "I had honestly conscionable assumed they'd spot our connection and conscionable accidental ... of course, we'll instrumentality this."

Bankman-Fried said determination were further discussions and the answers were "disappointing." The problem, helium said, was that the connection didn't instrumentality immoderate fees.

"If you're successful the concern of taking fees, past possibly our connection isn't what you like," helium said. "I judge it was a lowball connection for consultants looking to marque fees connected this case. That's not who I had had successful mind. I had the customers successful mind. But that is my existent champion knowing astir what happened."

Bankman-Fried's latest moves successful crypto person drawn comparisons with Warren Buffett's strategy successful 2008. The legendary Berkshire Hathaway president and CEO stopped the bleeding during the fiscal situation with a $5 cardinal concern successful Goldman Sachs. That yet brought the Omaha, Nebraska-based conglomerate a $3 cardinal gain.

"There are immoderate parallels," Bankman-Fried said. "There are astir apt much differences. First of all, I don't deliberation Warren Buffett would telephone maine the adjacent Warren Buffett. To the grade determination is simply a parallel recently, it's been looking astatine which assets are successful a spot wherever they beauteous severely request capital."

Bankman-Fried said he's uncovering spots wherever helium tin "simultaneously marque bully investments, and assistance backstop them and their customers and ecosystem." Although sometimes lone 1 is connected offer, not both.

He besides applauded Buffett's accomplishment successful long-term, worth investing. The capitalist has showed that "you don't request to person 1 superb innovation oregon insight, you tin bash it by conscionable piecing unneurotic bully determination aft bully determination implicit the people of decades and compounding that."

Like Buffett, Bankman-Fried signed the Giving Pledge: a committedness by the world's wealthiest individuals to donate the bulk of their wealthiness to charity. Bankman-Fried said helium has fixed distant astir $100 cardinal this year, with a absorption connected aboriginal pandemic prevention. Similar to Buffett, helium lives modestly. Bankman-Fried shares a location with 10 roommates and a Goldendoodle named Gopher. He drives a Toyota Corolla, and said helium has nary involvement successful the excesses of a yacht oregon Lamborghini.

But the 2 humble investors sharply diverge erstwhile it comes to their positions connected cryptocurrencies.

Buffett and his concern spouse Charlie Munger person been critical of cryptocurrencies implicit the years. In 2018, for example, Buffett called bitcoin "probably rat poison squared." Earlier this year, Buffett said helium wouldn't bargain each the bitcoin successful the satellite for $25 due to the fact that it "doesn't nutrient anything."

Buffett has called the underlying blockchain exertion "important" — but hasn't wavered connected the thought that "bitcoin has nary unsocial worth astatine all." Blockchains are integer databases that store cryptocurrency transactions and, successful immoderate cases, different data. Its main usage has been powering cryptocurrencies similar bitcoin. But fans of the exertion accidental it could beryllium utilized successful wellness care, proviso concatenation logistics and different areas of finance.

"I surely disagree with that," Bankman-Fried said. "I should anticipation [Buffett] disagrees with that, too. I don't deliberation you should beryllium moving a institution if helium thinks that, but I don't deliberation helium really thinks that. I deliberation that was precise apt hyperbole," helium said. "He's missed immoderate of the powerfulness of blockchain — he's besides missed immoderate of the impetus for it successful the archetypal place, and what's driving radical to privation a caller tool."

Correction: Gisele Bundchen is simply a marque ambassador for FTX. An earlier mentation misspelled her name.