What Stage of Capitalism Is Sam Bankman-Fried?

How do you make a multibillion-dollar company disappear in a week? For Sam Bankman-Fried and his crypto exchange FTX, the simple answer is that a leaked balance sheet leads your biggest rival, himself under federal scrutiny, to instigate a sort of “bank run” you cannot possibly cover, exposing billions of dollars in shortfalls you apparently created by riskily investing money that wasn’t yours. And revealing yourself, in the process, to be a very new kind of financial villain — one who pitches not just the prospect of profit but also deliverance from the corrupt speculative system in which you “made” your “billions.”

But if S.B.F. was just a meme stock — his cultural capital inflated by our collective desire to see his profile grow — what exactly was the meme?

Cryptocurrency is little more than a decade old, and yet it has passed through several reputational phases: first, as the lawless province of black marketeers and hard-core libertarians obsessed with escaping government oversight; then as a speculative market in which many of those people made an astonishing and enviable amount of money; then as an investment sector for adventurous normies who might previously have turned to simple day-trading; then as an “asset class” eyed by big-money investors and establishment banks. It was only at the start of last year’s N.F.L. season that Matt Damon, unknowingly standing on the precipice of a coming “crypto winter” in which the value of Bitcoin fell by two-thirds, endorsed Crypto.com and reminded millions of Americans that “fortune favors the brave.”

The gold-rush phase for cryptocurrency is over now — with the FTX collapse punctuating that crypto winter, a Christmas of malfeasance. The death of FTX has been called crypto’s “Lehman moment,” but it was not the first such collapse — it follows the implosions of Celsius, Three Arrows Capital, Terra and Luna, among many others. But it’s fitting that Bankman-Fried will now always be remembered as this crypto crash’s central figure, because he postured as someone who could rewrite not just the rules of the financial system but its morality as well. To investors and legislators, he looked like the potential face of a new era for crypto, poised to legitimize through transparency and regulation what had always been an enormously shady, if often quite lucrative, sector. To progressives, he looked like our kind of oligarch, a sort of boy wonder who seemed capable of conjuring up world-changing billions guiltlessly, effectively out of thin air.

And he had promised to give that magic internet money away just as quickly: to Democrats, for whom he was the second-largest donor in the midterm cycle and to whom he had casually promised as much as $1 billion by 2024; to pandemic-prevention policy work; to journalistic start-ups and a whole host of causes affiliated with “effective altruism,” a movement devoted to doing maximal good in the world. In just three years after its founding, FTX grew from zero to a $32 billion valuation and along the way seemed to provide every progressive millennial a potential sugar daddy.

This was a fantasy, as anyone looking closely at the time could have told you. But it was very tempting to believe, and nobody was trying to look all that closely, it turns out — not the editors who put him on the covers of Forbes and Fortune; not the traders who trusted him with billions in daily trading volume; not the recipients of his philanthropic pledges, many of which will now go unfulfilled; and most conspicuously, not the investors who handed him millions without seeming to even bother checking the books.

As recently as July 2021, FTX raised $900 million from, among others, Sequoia Capital, Daniel Loeb’s Third Point and SoftBank Vision Fund, which had previously written down billions of dollars in investments in Uber and WeWork. In January, a Series C round raised an additional $400 million. How superficially did they all review their investments, many of which ran into the hundreds of millions of dollars? In a now-legendary profile published on the Sequoia website just weeks before the collapse, almost every paragraph contained what should have been a red flag but was presented instead as a mark of Bankman-Fried’s special genius — and Sequoia’s, for endorsing it. When, in a pitch meeting, Bankman-Fried describes his vision for FTX as a market for everything up to and including bananas, while participating in a League of Legends video game “gank” (short for gang killing) in another window, the assembled investors go nuts: “I LOVE THIS FOUNDER,” one types in the Zoom chat. “10 OUT OF 10!” another taps. What stage of capitalism is this?

Six months ago, Bankman-Fried looked to the outside world like some mix of George Soros and Bill Gates, Laurene Powell Jobs and Leonard Leo. Now the comparisons are less flattering: to Bernie Madoff, of course, and to Elizabeth Holmes of Theranos, even though Bankman-Fried has not been charged with any crimes; also to Adam Neumann of WeWork, Travis Kalanick of Uber and the other iconic start-up hucksters of this strange venture-capital era. But those founders were, for all their delusions and sociopathy, pitch-deck visionaries — persuasive proselytizers for not just new products but whole new worlds that could be simply invested into being.

In his self-presentation, Bankman-Fried seemed to be pitching something else: an outward indifference approaching disdain. His serious-seeming commitment to effective altruism underlined the impression: If he was earning his billions only to donate them, he represented a very different case study in the morality or moral potential of unregulated markets. When, in an interview on the Bloomberg podcast “Odd Lots” this spring, he flatly described the crypto markets as pointless speculation bordering on fraud — one of the interviewers paraphrased Bankman-Fried’s summary as “I’m in the Ponzi business, and it’s pretty good” — it wasn’t a misstep. It was part of his DGAF brand, like the unkempt hair and cargo shorts he wore onstage alongside Bill Clinton and Tony Blair. You might remember someone like him from your college dorm, but in the world of big money he was a genuinely new archetype: a smugly superior Gen X slacker and an entitled, world-changing millennial at once. In his first interview since stepping aside at FTX, he told The Times’s David Yaffe-Bellany, casually, “It could be worse.”

For many months, this seeming indifference served to distinguish Bankman-Fried as crypto’s good guy. But in the weeks since the FTX collapse, it has also been the source of a lot of reflection and debate, about whether it had been at all reasonable to treat what made him distinct as a basis for lionization. He said in the Sequoia profile, for instance, that no book was ever really worth reading, and he told the economist Tyler Cowen in a podcast interview that faced with a coin-flip game in which half the time he’d double the value of the world and half the time he’d destroy it, he’d choose to play again and again. The venture capitalist Marc Andreessen offered a philosophical rejoinder on Twitter: “Utilitarianism is bad,” he wrote. “It encourages mortal men to play God at levels of complexity that they can’t possibly comprehend. It should be banned for the greater good.”

Andreessen’s venture-capital firm, meanwhile, is among the biggest players in the Web3 world, its signature crypto fund down 40 percent earlier this year. The contagion probably can’t be quarantined to the figure of Bankman-Fried or his worldview — because what he revealed himself to be wasn’t a singular bad actor but a representative one. Blockchain technology may well offer meaningful uses for the wider world in the future, but as of now, it is most significant as the basis for a realm of pure and unregulated speculation.

The volatility was not some deep secret only now revealed. It’s an almost inescapable aspect of a financial subculture erected outside the oversight and control of the law on the principle that they weren’t necessary. And while the broader impact of Sam Bankman-Fried’s undoing isn’t yet entirely clear, the early shakeout has been surprisingly limited: The world’s second-largest crypto exchange has gone belly-up, but the crypto market as a whole is down by only about 20 percent. For many speculators, it seems, collapses like these were already priced in.

David Wallace-Wells (@dwallacewells), a writer for Opinion and a columnist for The New York Times Magazine, is the author of “The Uninhabitable Earth.”