Sam Bankman-Fried from FTX explains how he built a $32 billion crypto exchange in 3 years!
The crypto market promises one thing above all: quick riches. But few got rich faster than Sam Bankman-Fried. According to the American business magazine Forbes, the 29-year-old player has a fortune of 24.5 billion US dollars. And this estimate could still be underestimated. Bankman-Fried told Business Insider, “I think it’s probably a bit more right now.”
The origin of Bankman-Fried’s wealth is the FTX exchange, which he co-founded in 2019 and which is now one of the largest cryptocurrency exchanges in the world. The Bahamas-based crypto exchange hit a valuation of $32 billion last month. Previously, Bankman-Fried had raised over $400 million from famous investment firms such as SoftBank, Tiger Global and Temasek. FTX is thus more valuable than Twitter, stock market giant Nasdaq and Deutsche Bank. Not bad for a three-year-old company.
Become a multi-billionaire in three years
Bankman-Fried graduated with a degree in physics from the famous American university MIT and got a job at the Wall Street trading company, Jane Street, in 2014. Three years later, he founded the crypto trading company Alameda Research. Then, in 2018, he realized that existing crypto exchanges were simply no good: they were buggy, insecure, and had next to no customer support. “You had the feeling that these are central, important and valuable systems that are really shitty right now and we can do better,” says the entrepreneur.
Bankman-Fried and his co-founder Gary Wang, also an MIT graduate and former Google software engineer, thought they had the technical know-how to build an exchange. The key question was whether they could attract customers. “Answers ranged from probably not to definitely not,” Bankman-Fried said. But gradually the customers came. People started talking about the new exchange on social media and telling their friends about it. The trickle turned into a flood in 2021: FTX had five million users by the end of the year, with daily volume hitting a record high of $60 billion in May.
A key part of FTX’s success is that crashes are extremely rare, says Bankman-Fried. In addition, traders are attracted by its foreign exchange policy. Fried allows them to have one account where margin balances balance, rather than multiple margin accounts (margin means borrowing money from a broker to trade). And they love the complex crypto derivatives that FTX specializes in. These allow customers to bet on the future price of major tokens like Bitcoin and Ethereum.
The difference with Coinbase
However, as a hub of risky trading activity, FTX is firmly in the sights of regulators and lawmakers. Bankman-Fried found himself in Congress last week with Democratic Senator Sherrod Brown asking him, “Is it reckless for crypto companies to get rich selling such a dangerous and risky product to Americans?”
FTX users are roughly evenly split between retail investors and institutional investors. However, institutions such as high-frequency trading firms, hedge funds, and family offices account for around 80% of revenue and volume. This is in stark contrast to Coinbase or the site https://bitcoin-profit.org/fr/the largest US exchange, which derives the vast majority of its revenue from retailers.
From four people when it started, FTX now employs about 250. In contrast, Deutsche Bank, which is worth four billion dollars less than FTX, has more than 80,000. Investors are keen to get a share of the stock market, but Bankman-Fried says he feels no pressure to take the company public himself. “We don’t need capital, we are profitable,” he said. “We will do what feels good for the business.”
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Sam Bankman-Fried Creates a Crypto Exchange – artsixMic
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