In-depth Analysis: The Rise and Troubles of SBF

Original authors: Vicky Ge Huang & Kari McMahon

Translator: Tanker, Deep Chain Finance

Can you imagine that FTX founder Sam Bankman-Fried (SBF) sleeps only 4 hours a day while using 6 screens to multitask? Next, we will unveil the mystery of this 29-year-old cryptocurrency billionaire and take you into his company to see what tricky problems they are currently facing.

The collage above is filled with many elements, such as MIT, Hong Kong, Berkeley, California, and Nassau, Bahamas. The cyan background features the logos of FTX, Bitcoin, and Solana, with SBF positioned right in the center of the artwork—these elements are all closely related to his personal background.

About three years ago, in 2018, SBF was just a young Wall Street trader. Who would have thought he would later become the founder of a cryptocurrency company? According to his recollection, he went to Asia for a conference and discovered a price difference for Bitcoin between Asian and Western trading platforms, a difference known as the "kimchi premium."

SBF's instincts are exceptionally sharp. During this business trip, he rented a WeWork office and had the rest of his Alameda team take the next flight over (Alameda is the crypto trading startup founded by SBF, which was just getting started at the time).

Some might think that such upheaval would upset the company’s employees, but SBF managed to pull it off—this is his personal charm.

When mentioning SBF's seemingly reckless decision to act immediately, former Alameda COO Andrew Croghan said that SBF told them at the time, "We need to send people over right now. I believe if we stay working in Berkeley and don’t choose Hong Kong, we will lose $50,000 every day."

According to Andrew Croghan's recollection, as soon as their plane landed, the newly arrived employees immediately got to work, setting up their computers and scouring nearby malls and street vendors for monitors and data cables, busy as bees.

Andrew Croghan stated, "Some might worry about what to do if we rushed to a new location and suddenly lacked many things. But SBF didn’t. Instead, we simplified things to improve efficiency. It turned out to be very effective."

Moving the office to Hong Kong was not just for work; it was all thanks to the crypto arbitrage game, where SBF and Alameda could earn a daily return of 10% from millions of dollars in trades. According to Forbes, as of December 13, SBF has transformed from an obscure trader four years ago into the leader of a crypto empire with a personal fortune of $26.5 billion, and the decision to relocate the company to Hong Kong years ago was undoubtedly a key milestone in his success.

In 2019, SBF founded the cryptocurrency trading platform FTX, which has since surpassed the market capitalization of several companies listed in the S&P 500. Notably, FTX has gained the trust and financial backing of top global investors (who are, of course, very shrewd), including investment giants like Tiger Global, Sequoia Capital, and BlackRock, all of whom participated in FTX's recent funding rounds.

Moreover, SBF has established partnerships with some big names in sports, business, and entertainment, from NBA star Steph Curry to renowned NFL quarterback Tom Brady. Today, SBF has become a hot topic in the crypto community, frequently appearing in financial media like Bloomberg and CNBC to analyze market trends. Additionally, he has another identity—a philanthropist, as FTX has donated over $16 million to charitable causes since early 2021.

Of course, SBF accomplished all of this while the cryptocurrency industry faced the strictest regulatory scrutiny in history. After regulatory authorities in mainland China cracked down on various forms of cryptocurrency mining and trading, SBF made the decision to withdraw investments (his second major change in two years) and moved FTX to the Bahamas, which had passed a landmark cryptocurrency support bill at the end of 2020.

This move spared FTX many troubles, while its competitors (other cryptocurrency trading platforms) faced hefty fines or regulatory investigations.

However, SBF's journey has not always been smooth sailing. Compared to other competitors, FTX's biggest "weakness" is that SBF's company employees are primarily a group of developers. This organizational structure is closely tied to SBF's belief in "high efficiency," but as FTX began to relocate and SBF had to manage two rapidly growing companies, immense pressure followed. Some of his employees expressed feeling overwhelmed and planned to resign.

Of course, none of this surprised SBF's supporters in Silicon Valley, as they believe he is a once-in-a-century talent whose every move is correct. For example, Edith Yeung, a venture capitalist at Race Capital and one of FTX's seed round investors, once stated, "To me, SBF is like Mark Zuckerberg in the cryptocurrency space." According to Forbes, SBF is the only person besides Mark Zuckerberg who has rapidly amassed wealth in such a short time.

On the other hand, SBF's closest friends, colleagues, and investors have come to understand this genius founder very well. They share the qualities that have led to his success, what it feels like to work with a visionary leader who has an intense work ethic, and how SBF "navigates" regulatory scrutiny while attracting investors.

These colleagues emphasize that SBF's actions are like walking a tightrope: meeting regulatory requirements while keeping investors satisfied, not overworking employees, and ensuring that every step is taken carefully during the company's expansion.

Those who know SBF say that one key reason he can achieve his goals is that SBF has exceptional multitasking skills.

Caroline Ellison, co-CEO of Alameda Research, said, "You often see SBF watching soccer on one screen, watching a Rihanna YouTube video on another, replying to messages on a third, trading on a fourth, and making calls on a fifth—all of these things happening almost simultaneously."

Having such skills may be related to SBF's childhood gaming habits. He was very fond of board games as a child but would use a timer to play two games simultaneously.

SBF's Background

SBF's parents are both law professors at Stanford University, and he has a younger brother. It can be said that his childhood gaming experiences honed his multitasking skills. He and his brother Gabe Bankman-Fried enjoyed playing Magic: The Gathering, bridge, chess, and other board games, but playing just one game at a time was no longer challenging for young SBF.

Gabe Bankman-Fried recalled, "We both loved board games as kids, and my brother would use a timer to play two games at once."

SBF admitted that this was a way to avoid boredom, as playing just one game at a time would make him feel very bored: "If I think I don't need to be fully engaged in thought, like when there’s no time pressure or my opponent is stalling, I start to feel bored," adding that he would start playing on his phone or computer or doing other things when his opponent was slow.

As a student at MIT, SBF joined a fraternity called "Epsilon Theta," which had about 20 members and often held various parties at the university, such as drinking, solving puzzles, and playing board games. During his time at school, SBF not only focused on his studies but also participated in various student organizations.

He recalled that in 2010, during a five-week math summer camp at Mount Holyoke College, he met a fellow alumnus who would later become co-CEO of Alameda Research, Sam Trabucco.

SBF joked that he was definitely a "slacker" when it came to completing his studies in college, saying, "I usually worked about an hour and a half a day, so it was hard to get things done on time. I was a disobedient student."

But by June 2014, SBF joined the legendary Wall Street quantitative trading firm Jane Street, where his innate time management skills became one of his strengths. According to Ellison, who worked in the firm's stock trading department, SBF particularly enjoyed intellectual challenges and quickly mastered the ability to make quick decisions under pressure.

While working in Jane Street's international ETF department, SBF learned how to exploit price differences in ETFs across different global exchanges for arbitrage trading, but it wasn't until he began trading in the fast-paced crypto market that his exceptional trading talent truly emerged.

In October 2017, SBF founded Alameda Research in Berkeley, California, where he began his pivotal Bitcoin arbitrage trading.

Both Ellison and Trabucco stated that SBF could spot opportunities and act faster than most traders, a remarkable ability that quickly earned him the nickname "crypto whale"—because the company made many astonishing moves in the crypto market.

As the scale rapidly expanded, Alameda Research could no longer operate quietly. They soon caught the attention of Ryan Salame, who was then working at Circle's OTC desk in Hong Kong. According to Ryan Salame, he noticed that the company named Alameda Research "suddenly appeared from nowhere" and frequently offered "extremely competitive" pricing in the market, which led to their trading relationship.

Before long, Ryan Salame decided to work for SBF, having previously interacted with him at a conference in Singapore. Soon, Ryan Salame officially joined Alameda as the head of OTC operations, stating, "I had never spoken or interacted with someone like SBF before. He is not only smart but also very personable, and he communicates with people in a very genuine way, discussing things that interest everyone, which left a deep impression on me."

After earning trading profits through Alameda, SBF had enough money to donate to charities—this was also the main reason he initially turned to the cryptocurrency field. However, SBF had even bigger ambitions.

In a subsequent interview, SBF revealed that he hoped to create a trading platform to replace the "terrible trading platforms" he had used in 2017 and 2018.

This is a daunting task. Running a cryptocurrency trading platform has never been easy, especially in the U.S., where banks are cautious about the illegal use of cryptocurrencies and typically refuse to do business with exchanges. Once established as a legitimate business, large companies like Coinbase and Gemini must comply with various laws and regulations, which can be burdensome for exchange operators. Therefore, U.S. cryptocurrency trading platforms often offer limited products and services.

In contrast, platforms outside the U.S. face few restrictions and can offer region-specific derivative products, such as leveraged tokens and tokenized stocks. Additionally, traders can engage in trading with up to 100 times leverage by posting margin—meaning anyone with $1,000 can immediately participate in a $100,000 trade. This flexibility has also fueled the rapid growth of offshore exchanges.

In July 2017, Zhao Changpeng launched an initial coin offering product, raising $15 million for Binance—opening a cryptocurrency trading platform supported by the Ethereum-based BNB ERC-20 token and establishing Binance within 180 days, achieving a valuation of $1 billion.

SBF did not launch FTX until 2019, but his derivatives exchange has grown from obscurity to currently ranking sixth in spot trading and second in derivatives trading—only behind Binance. (In July, both FTX and Binance reduced their leverage limits from 100x and 125x to 20x, but some offshore exchanges like Bybit still offer traders leverage of up to 100x.)

Currently, professional traders are flocking to FTX because it offers high cost-effectiveness, such as low trading fees, support for lending products, trading of tokenized stocks and futures, and trading across multiple sub-accounts with different risk levels.

To create a competitive platform in such a short time, SBF worked tirelessly, famously sleeping only four hours a night on a couch next to his desk, still answering calls from clients and investors at 3 a.m.

What I worry most about FTX is slow progress and chaos— SBF

Ryan Salame recalled an incident: SBF had been working for 30 consecutive hours, and just as he was about to go to bed, a client called. Seeing SBF lying down, Ryan Salame couldn't bear to wake him, so he rescheduled with the client—this frustrated SBF, who firmly said, "You must wake me next time; there’s no question about it."

Ryan Salame said another main reason he worked for SBF was his personal charm—so much so that he gave up his position as head of OTC at Alameda in Hong Kong to follow his boss to the Bahamas and become CEO of FTX Digital Markets.

Ryan Salame admitted, "This company is everything to SBF."

Since FTX's headquarters moved to the Bahamas, it has reaped substantial rewards. The Bahamas boasts beautiful beaches and high-speed internet, making it very attractive for cryptocurrency traders. Moreover, since the island is only an hour's flight from crypto hubs like Miami, the FTX team no longer has to deal with a 12-hour time difference and strict quarantine requirements.

However, SBF does not lie on the beach enjoying the sun; since moving to the Bahamas, his work and schedule have become even tighter. As a result, problems began to arise because not all employees could keep up with SBF's pace. Three former employees of the company and one anonymous insider stated that they felt exhausted and ultimately had to resign, having already felt fatigued before moving to the Bahamas.

Noah Dummett, a former trader at FTX and Alameda Research, stated, "While working with SBF is quite inspiring, it is also exhausting. The company expects everyone to work towards a common goal, so everyone needs to plan their time and direction well and always strive towards that goal. So if you choose to work at Alameda and FTX, it means you have almost no personal time, and burnout is quite normal."

An anonymous software engineer who worked at both FTX and Alameda complained, "Every day is the same: walk into the office, read, have breakfast, write code, order food while working, eat while working, and finally go home, repeating this seven days a week."

Compared to its competitors, FTX has a very small number of employees. According to SBF himself, there were only two software developers in the first six months at FTX. Two and a half years later, its trading platform and all subsidiaries had only a total of 10 to 25 staff members. In contrast, Binance currently has about 180 engineering positions vacant, while Coinbase has about 120 engineering positions open.

SBF said, "What I worry most about FTX is slow progress and chaos. Many companies have encountered this situation, but I hope we won't."

At this stage, SBF faces a dilemma:

First, if he hires too many employees, he worries about inefficiency;

Second, if he hires too few employees, it will lead to high turnover rates.

However, the small number of developers at FTX has indeed surprised some experienced executives from trading platforms, such as Jerald David. Jerald David has worked at the New York Mercantile Exchange, Dubai Mercantile Exchange, and Chicago Mercantile Exchange, and is currently the president of crypto asset management company Arca Capital Management. He stated, "I was part of a founding team of a cryptocurrency exchange, and in this field, the business model is actually quite simple—more developers lead to faster scaling."

Jerald David believes that having only two developers in the first six months at FTX is "quite surprising." Typically, a trading platform operating with such a large trading volume would not normally have fewer than 30 developers. He compared FTX's development team size to CME, which has over 500 developers. CME recently acquired the crypto derivatives exchange ErisX, while FTX's U.S. subsidiary acquired the crypto derivatives exchange LedgerX in August, making the two platforms competitors.

SBF believes that having a smaller team allows him to make quick decisions and push for new versions to be released. He said, "There is a cost to this, but I think it is very worth it. When the situation is urgent, the most important thing for us as a company is to maintain high efficiency and coherence." To ensure this, SBF sometimes even provides technical support to the team himself.

Ryan Salame admitted, "Even today, SBF still joins our team and provides technical support."

SBF stated that the company's employee turnover rate is actually quite low—about 5% or less each year—but he acknowledged that work fatigue is indeed one of the biggest issues leading to employee departures, and sometimes his employees do not have much need for vacations. SBF responded, "I think it's important for people to know where their limits are, to do their best to reach their preset goals, but not to exceed their capabilities and end up exhausted. I think this is something we must constantly strive for and do correctly."

Despite this, SBF's threshold for fatigue is higher than most people's. He said, "When I feel exhausted, it usually means I need to rest for a night or sleep for 10 hours to recover. And when I don't work for four days, I start to feel restless, always thinking about how work is progressing and eagerly wanting to return."

I think many of us know that what we are doing is unsustainable— Andrew Croghan

Caroline Ellison, co-CEO of Alameda Research, stated that SBF can work harder than most people because he has a genuine motivation—to donate cryptocurrency wealth and make a positive impact on the world. Ellison explained, "I think if you truly have a belief, then you can sustain it. You can do much more than many people, and I think that’s what SBF wants to do."

However, as FTX gradually grows into a crypto empire, even the most loyal employees may not be able to bear the immense pressure. Andrew Croghan said, "I think that of the 10 veteran figures who fought alongside me, less than 50% will stick around because many of us know that what we are doing is unsustainable."

To be honest, new employees cannot achieve the same level of commitment as veteran employees and the company's founders, especially when they have to work under long-term high pressure and adapt to SBF's direct communication style.

SBF readily admits that giving direct feedback to employees is his biggest weakness. He explains, "Sometimes I can be brutally honest with practical feedback, which may sound negative or even hard to accept. And I think for those who lack self-awareness, and sometimes even for those who are self-aware, hearing this feedback can be difficult to accept and lead to low morale."

Kevin O'Leary, an investor on Shark Tank, is also known for his straightforward style. He stated that energetic and insightful young founders are not uncommon, but finding those capable of executing these ideas is another matter. Kevin O'Leary said, "Vision is often overestimated; what we need most is execution. Both are essential."

Kevin O'Leary believes he sees both "vision" and "execution" in SBF.

Until recently, Kevin O'Leary held a skeptical view of the crypto space, but that did not prevent him from becoming an ambassador and shareholder of FTX earlier this year. He attributed his change of heart to what he calls FTX's "investment-grade compliance," saying, "I think this is not equivalent to an app you download from the Apple Store, nor is it just an ordinary area where you invest millions of dollars, but rather a true enterprise infrastructure."

Above: SBF sits at a long white table dining with Anthony Scaramucci and Shark Tank investor Kevin O'Leary. From left: Steve Cohen, Anthony Scaramucci, SBF, and Kevin O'Leary.

Venture capitalists like Kevin O'Leary have always viewed regulation as the biggest potential risk in investing in the crypto space. Over the past year, the U.S. Securities and Exchange Commission has been blocking Coinbase from launching its lending product, while financial regulators in the U.S., EU, and Asia have intensified their crackdown on Binance.

Reportedly, Lightspeed venture capitalist Amy Wu participated in FTX's latest funding round, stating that to her knowledge, FTX is the only exchange without negative regulatory news. Amy Wu analyzed that her team found that FTX should be considered one of the most compliant cryptocurrency exchanges globally after evaluating the types of licenses held in various markets and the communication and regulatory approaches with regulators.

Notably, SBF has shown no signs of slowing down FTX's rapid expansion. According to two anonymous sources, after concluding the recent funding round, the company's valuation reached $25 billion, and he began raising the next round of $1.5 billion just six months later (a spokesperson for FTX declined to comment on the report).

The valuation in this latest funding round for FTX is expected to be $32 billion, while its U.S. subsidiary is valued at $8 billion, which is closely tied to SBF and the entire crypto industry being at a peak period.

According to a survey by the Pew Research Center, 16% of Americans have been exposed to cryptocurrency, and we see that—

1. The total global market capitalization of cryptocurrencies has soared from $800 billion at the beginning of the year to $2.3 trillion now;

2. Traditional Wall Street firms have begun to test the waters in the crypto industry, continuously increasing their weight in emerging markets;

3. Retail investors are driving the popularity of meme coins like Dogecoin and Shiba Inu;

4. Celebrities and star athletes are promoting crypto companies through advertisements.

At the same time, an undeniable fact is before us: scams, fraud, extortion, hacking, and money laundering activities related to cryptocurrencies are also on the rise, keeping regulators on high alert. However, some industry insiders state that SBF's company and its expanding crypto ecosystem have already outpaced the regulatory pace.

Anthony Lee Zhang, an assistant professor of finance at the University of Chicago Booth School of Business, explained, "One reason Web 3.0 has developed so quickly is that regulation has not kept up; you can build and launch your own things without having to deal with regulators."

Despite maintaining regular contact with regulators during this time, it must be said that regulatory scrutiny is still intensifying.

Earlier this month, SBF attended a U.S. congressional hearing on the future of digital assets and finance. While most policymakers at the hearing expressed their willingness to establish comprehensive regulations for the crypto industry, some voiced concerns that the rapid growth of digital assets could pose a threat to financial stability, such as using digital currencies to fund criminal activities.

SBF countered at the hearing, "The crypto industry has the potential to improve people's lives."

When looking ahead to FTX's future, several industry insiders compared SBF to Facebook's founder—who also faces tricky regulatory issues.

Mark Zuckerberg founded Facebook at the age of 19, and today this social media giant is valued at over $900 billion. This startup occurred during the Web 2.0 era, a time when user-generated content markets and social networks flourished. It can be said that Facebook changed the world during that period; however, in recent years, due to data privacy issues and failure to strengthen control over misinformation published on the platform, the company has attracted increasing regulatory scrutiny.

Now, an era of crypto, decentralization, and virtualization seems to be emerging, which we call Web 3.0, where companies like FTX are at the forefront. Notably, Mark Zuckerberg has recently jumped on the "metaverse" bandwagon, renaming Facebook to Meta and pledging to invest billions of dollars and hire thousands of employees to create a more digital ecosystem.

Even so, Facebook may still trigger more regulatory scrutiny, hindering Mark Zuckerberg's implementation of his metaverse vision. Similarly, the crypto space will face the same double-edged sword: increased regulation and widespread adoption, meaning that the growth rate of companies operating in the crypto ecosystem will slow down.

Therefore, both regulators and the crypto space need to give each other some time to learn to cooperate. Everything they are doing now is too frantic, which will inevitably affect the speed of progress. The ultimate synergy is essential for making crypto mainstream and ultimately making the world a better place and the economy more efficient.

As for SBF, he does not like people comparing him to Mark Zuckerberg, believing that the two are not similar. Those who know SBF understand that his entrepreneurial motives are more selfless. His brother Gabe Bankman-Fried said, "Making changes as much as possible is actually a moral obligation for us, and I think this is something we have valued since childhood." The two brothers are supporters of effective altruism, a philosophy that emphasizes using one's resources to achieve the greatest benefit for others.

As the company's business scope continues to expand, Zuckerberg has been embroiled in controversies with regulators while trying to set a new precedent. According to several insiders, SBF has become one of President Biden's biggest supporters in his 2020 campaign and seems to have the ability to address congressional concerns about the crypto space through cooperation with regulators.

Noah Dummett, a former trader at FTX and Alameda Research, stated, "I expect that in 10 years, SBF will be one of the richest people in the world and will have solved some of humanity's most critical problems, and his involvement in politics doesn't surprise me—it puts him in a very advantageous position, and he has the right motives to achieve it."

Regardless of what the future holds for SBF, the drive, vision, and efficiency he has shown in building a crypto empire are truly remarkable, and comparisons to Mark Zuckerberg will not cease. As the public sees, Mark Zuckerberg remains as driven as ever and is still actively seeking new active users today. Many believe SBF is the same, after all, he is only 29 years old and has maintained a high-intensity work ethic to this day.

In conclusion, let’s end with a quote from an SBF colleague—

"As long as SBF gets enough sleep, of course not a long sleep, I believe he will remain a very powerful entrepreneur for a long time."