When an aide told me that “one of our drivers” would pick me up for my lunch with Sam Bankman-Fried, I imagined a hulking black SUV of the kind that shuttles high rollers to and from the casinos in Nassau, where the 30-year-old crypto billionaire lives. Instead, it’s a modest maroon Honda that pulls up outside my hotel.
The headlong drive along the island’s winding coast road takes us past the terracotta-roofed compound that houses Bankman-Fried’s crypto exchange, FTX, which processes billions in transactions every day, and the overgrown seafront plot where it plans to build a new 1,000-seat headquarters, having moved to the Bahamas from Hong Kong after China outlawed crypto trading last year.
Bankman-Fried, known widely as SBF, also defies expectations. In just three years, the success of FTX has catapulted him to fame and a roughly $24bn personal paper fortune. His company is backed by blue-chip investors including BlackRock and government pension funds. In March, Goldman Sachs chief executive David Solomon met with him on Bankman-Fried’s Caribbean home turf. And the week before our lunch, he hosted a conference where he interviewed Bill Clinton and Tony Blair, dined with Katy Perry and Tom Brady, and was pursued for selfies by admiring fans. Even on stage, he wore his signature shorts and T-shirt.
Although Bankman-Fried has a knack for winning converts, crypto is still assailed by critics who see the sector as a financial perpetual motion machine, something close to a Ponzi scheme, that survives by sucking in new money. (In the past week, that momentum has reversed, as token prices have tumbled.)
Bankman-Fried offers an alternative narrative, focused on how crypto can do good and give ordinary people control of their money. He plans to give away at least 99 per cent of what he earns as fast as he can. “I have about $100,000 in my bank account. And I think we have given away about $100mn so far this year,” he says. (Still, he revealed on Thursday that he had found the cash in recent months to buy up a 7.6 per cent stake in online stock brokerage Robinhood for $648mn.) His meteoric rise shows how crypto has enhanced the power of a new financial elite, which is more tech-savvy than the old one.
We are dining at Albany, a lush private compound where the Californian lives. The restaurant is situated in a rose-coloured complex of shady covered walkways. Upstairs, as I am seated on the breezy veranda, I ask the waiter why the view seems familiar. Because this is the beach where Daniel Craig emerged from the water with his James Bond physique in the film Casino Royale. Now the name of the restaurant makes sense too: Vesper.
It’s hard to reconcile this setting with Bankman-Fried’s reputation as a maverick who eschews luxuries in favour of philanthropy. But, as I am about to discover, with Bankman-Fried, few subjects are quite so straightforward.
Bankman-Fried rushes on to the veranda, half an hour late, with a nervous greeting, plops into the chair, unfolds his napkin and pulls it halfway up his midriff like a blanket.
Despite his relentless schedule, he doesn’t look tired. But he readily admits his social batteries have been run down by all the public appearances and celebrity encounters. “I’m not super-extroverted,” he says. “I get brief vertigo the first time that something happens. I’m like, holy fucking shit . . . I am at a dinner party right now and take a look at this guest list.”
We are the only table, and the waiting staff are hovering. I choose a starter, the Impossible fake-meat tacos, and then an Impossible burger, in deference to Bankman-Fried’s veganism. Ignoring the starters, he opts for a falafel bowl, hold the feta.
A drink? No. I pause for a moment to consider whether Bankman-Fried’s abstinence might help to explain why — at almost exactly the same age — he has $24bn and I don’t. Then I get a grip and order a glass of rosé.
Does he drink much? No. Ever? He estimates his alcohol consumption at 0.5-1 units annually. “The amount that some people lose productivity-wise to drinking . . . I wouldn’t be surprised if it’s 25-30 per cent,” he says. “I tried to get drunk once to see what it was like and I failed, because I really hate the taste of alcohol.” Fractions and experiments. Both turn out to be characteristic of my lunch partner.
When we meet, total crypto market cap is just shy of $2tn, down by some 40 per cent from its high last autumn. Since then, a brutal sell-off has stripped another 35 per cent from its value and rattled crypto’s foundations. I ask Bankman-Fried what the value of crypto markets is based on.
The question appeals to Bankman-Fried. He hoists himself up on the arms of his chair in excitement and begins the first of his rapid, tightly structured answers. Bankman-Fried is in the camp that views the value of most tokens as a bet on the potential of blockchain to build a better financial system. He takes the example of a simple cross-border payment. Using blockchain, he says, that transfer is “gonna be cheaper, it’s gonna be faster, and it’s much more likely to succeed. And that, I think, is the most compelling piece of it to me.”
Bitcoin, he thinks, is a special case. He likens it to gold as “an asset, a commodity, and a store of value”, but says it will never work for day-to-day payments. The system used to validate bitcoin transactions isn’t capable of operating at the scale required, and the environmental costs would be unacceptable. Using bitcoin for daily payments would be akin to paying for purchases with gold bars, he says. “Why don’t we go to a store and pay with physical gold bars? First of all, it would be ridiculous and absurd. It would be unbelievably expensive. And I’m sure it’d be bad for the climate.”
What bothers him most about crypto? “It’s a combination of not following through on the product but thinking — or at least posturing — like this was already a world-changing product,” he says, referring to boastful start-ups that produce a product that barely works. “If I’m JPMorgan, I don’t know if I’m quaking in my boots.”
Even believers in the technology can view crypto prices as wildly inflated. I try a blunt approach: how much of crypto’s $2tn value is bullshit?
Bankman-Fried doesn’t mind the question, but he would like it clarified. After some haggling, we conclude that if most of an asset’s value is derived from pure hype, then we’ll call it bullshit. Premises established, Bankman-Fried pauses. “All right, give me a sec, just to sort of tally up,” he says and stares fixedly into the ocean beyond the tossing palms.
“My basic sense is that by volume or market cap, most of crypto is real. But by number of tokens most of it is bullshit,” he says. To put a number on it, excluding bitcoin: “something like 80 per cent of market cap is coming from tokens that are at least mostly not bullshit.”
The idea that most tokens are overhyped seems a pretty scathing criticism. Bankman-Fried clarifies that around 50-100 tokens seem to him to have value, while the remaining thousands do not. I later look up the figure: FTX lists 293 tokens for its customers to trade.
I ask Bankman-Fried what he thinks of critics who liken crypto to a Ponzi scheme. Again, my question needs a bit of work. First, he tackles scams where people set out to deceive investors. “By number of Ponzi schemes there are way more in crypto, kinda per capita, than in other places. But by size of actual Ponzis, I’m not sure that it is particularly unusual. It’s just like a ton of extremely small ones,” he says.
But what Bankman-Fried thinks people are really asking, when they query Ponzi schemes in crypto, is: “How much of crypto is sort of a weird layered system . . . [a] complicated monetisation scheme with nothing underlying it?”
By this point he is asking the questions and answering them, and I am just sipping my drink. Bankman-Fried gestures with his right hand; I notice there is a whizzing silver fidget spinner locked in his left fingers under the table.
He returns to the critique that crypto is “overvalued and overheated”. “I think that’s a totally plausible claim,” he says. “I certainly don’t strongly feel that it’s wrong. And I think you could have made that claim about the stock market six months ago. You could have chosen a random tech stock and been, like, what the fuck is this market cap coming from?”
The food arrives, all at once. Bankman-Fried gets a tragic bowl of veg with three falafels dropped in the middle. The knobbly log of Impossible “meat” in the centre of my tacos looks less than appealing; the burger is better.
FTX has spent millions encouraging people to buy into crypto. Its advertising spot at the Super Bowl likened blockchain to inventions from the wheel to the lightbulb and implored viewers: “Don’t Miss Out.” But I wonder how many first-time investors are enthralled by the tech, versus those who see digital assets as a playpen in which they can speculate and make money?
Bankman-Fried toys with my question as much as he is playing with his salad: “Here are two words, which I think are close to synonyms, but have very different connotations . . . price discovery and speculation.” Price discovery is a vital feature of markets, but it requires people taking on big bets and embracing the chance that they’ll lose.
Coming back to the motives of crypto investors, he throws out another fraction. Two-thirds to three-quarters of first-time crypto investors just want to make money. Six months later, at least 50 per cent will be won over by enthusiasm for the tech, he estimates.
“I can certainly say I was in that category. I first got involved with no fucking clue what a blockchain was. I was just doing arbitrage,” he says.
Bankman-Fried’s journey to crypto was an unlikely one. The son of two Stanford law professors, Bankman-Friend studied physics at the Massachusetts Institute of Technology before taking a job at Jane Street, the trading firm. He was already interested in philanthropy, so part of the pull of Wall Street was the opportunity to give away a large fraction of his salary.
In 2017, he moved into the charity sector, taking a job at the Centre for Effective Altruism, a non-profit that aims to promote high-impact giving. But, around the same time, Bankman-Fried became interested in crypto and stumbled across the wildly different token prices quoted by Japanese exchanges — a golden opportunity for arbitrage. “I was trading all night and, in theory, working all day,” he says. “And after a month or two I was, like, this is dumb.”
He quit the centre to focus on crypto trading, swiftly making millions and founding his first company, the trading firm Alameda Research. A year and a half later, he founded FTX. The timing was impeccable. Within months, token prices began their spectacular climb. FTX rode the wave to become one of the world’s largest crypto bourses. But its team remains small and tight-knit.
At his penthouse in Albany, Bankman-Fried still lives with his co-founder, whom he met at maths camp, and several former roommates from MIT. “I do not have time to put a lot of work into organising social events and a social life,” he says.
While I am picking at my starter, he has wolfed down his main — mashing up the falafel balls with his fingers — leaving just a single olive pit and a sprig of mint on his plate, which the server swoops in to clear.
I take a perfunctory bite of my burger and steer the conversation towards his ethics. Bankman-Fried says he switched from charities to crypto because he became convinced that he would do the most good through earning as much as he could, then giving it away.
“I talked to a few of the charities [and asked] . . . would you like my money or my time?” he recalls. The charities said it wasn’t even close. “Your money — by, like, a factor of five.”
His background in effective altruism, a philanthropic movement with a utilitarian bent, gives him a framework for his decisions, weighing up costs and benefits to achieve the greatest good for the greatest number.
Like other adherents, Bankman-Fried favours causes with the highest impact on human lives, from climate change to preventable disease. The primary limit on his donations is how fast the money can be effectively deployed, he says.
As politely as I can, I point out that his lifestyle — one night at Albany starts from around $3,000 — is still vastly more luxurious than most people who live in Nassau, let alone the world. He thinks critics of the rich focus on the wrong things. “There’s incredible scrutiny on, like, weird minute details that end up taking on some political significance,” such as flying in a private jet, he says. “If my personal consumption is less than 1 per cent of what I make, I’m just not going to worry about it.”
I have finally relinquished my plate. I ask how FTX weighs up in his ethical calculations. “My basic prior on things in finance, if you ignore their crypto angle, is that they’re somewhere between neutral but a waste of brainpower, and moderately good for the world,” he says.
Does he worry about the clients who lose life-changing sums through speculation, some trading risky derivatives products that are banned in several countries?
The subject makes Bankman-Fried visibly uncomfortable. Throughout the meal he has shifted in his seat, but now he has his crossed arms and legs all crammed into a yogic pose.
“You don’t want it to be a way to transfer wealth from the poor to the rich,” he says. “There are obviously examples where that has happened. But I think there have been way more examples where there have been people who had very little, who ended up making a lot from crypto and for whom it changed their life.”
I signal for the bill and, when it arrives, Bankman-Fried immediately reaches out for it. I explain that the FT pays for lunch. “Thanks,” he says, taken aback.
I take the opportunity for a final question: will crypto live up to its claims of empowering people? Bankman-Fried says it is still in the balance. It depends on whether the sector falls victim to monopolies. He believes network effects and regulatory barriers have made it difficult to disrupt banks and social media platforms, creating an “entrenched elite”.
“A lot of this is going to come down to exactly what regulation looks like,” he says. “It could go either way.” Equally the outcome will depend on crypto bosses like Bankman-Fried — and whether the new elite is really so different from the old.
Joshua Oliver is an FT asset management reporter
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