The CEO of crypto giant FTX lost $16 billion of his personal fortune as his company faces a liquidity crisis and is rescued by his rival.
Sam Bankman-Fried, 30, who last year praised that his crypto firm would be big enough to buy Goldman Sachs, will see his fortune plummet to $1 billion after receiving a Binance bailout from rival Changpeng Zhao. Bloomberg reports.
The loss of 94 percent is the biggest one-day collapse ever among billionaires.
FTX’s token, which was valued at nearly $20 earlier on Tuesday, is now down more than 75 percent to just over $5.
In comparison, Bitcoin, the most popular of the cryptocurrencies, currently has its token valued at $18,480.21
Zhao, 45, appeared to be beaming on Twitter about the demise of his rival, denouncing FTX’s decision to use its own cryptocurrency for more than $16 billion in collateral for another company owned by Bankman-Fried.
“Two big lessons: never use a token you’ve created as collateral,” Zhao wrote after news of the bailout. “Don’t borrow if you run a crypto company.”
FTX CEO Sam Bankman-Fried (left) will see his fortune crash from $16 billion to $1 billion after his company is bailed out by crypto rival Changpeng Zhao, CEO of Binance
FTX’s token fell about 75 percent in value to just over $5 on Tuesday
Zhao announced that he will be taking over FTX on Twitter, and Bankman-Fried’s decision to use his own cryptocurrency as collateral for his crypto trading company, Alameda, seemed justified.
Bankman-Fried is widely regarded as one of the biggest names in the crypto market, with his personal wealth ever peaking at $26 billion.
The young billionaire made headlines, promising to shape the world by donating millions to political causes and charities.
According to Bloomberg’s Billionaire Index, Bankman-Fried had a 53 percent stake in FTX worth about $6.2 billion.
His most valuable asset, however, was in his crypto trading company, Alameda Research, which contributed $7.4 billion to his personal fortune.
Last Friday, reports revealed that one token issued by FTX, FTT, made up about 25 percent of Alameda’s $14.6 billion assets, and another token labeled “FTT collateral” accounted for $2.16 billion.
Following the revelations, Zhao said his company would liquidate its holdings of FTT, crashing the token’s value by 80 percent.
Along with FTX, Alameda is expected to see its value shrink to $1. It is currently unknown whether Zhao will rescue Alameda along with FTX, raising fears among those who have invested in the crypto trading house.
On Tuesday morning, Zhao tweeted that FTX was seeking help amid the liquidity crisis.
“There is a lot to cover and it will take some time,” Zhao said of the acquisition. “This is a very dynamic situation and we are assessing the situation in real time.”
“Binance has the freedom to withdraw from the deal at any time,” he noted. “We expect the FTT to be very volatile in the coming days as things develop.”
Zhao said the bailout will take some time and expects the FTT token to crash
While the cryptocurrency market remains volatile, FTX has fallen to just a fraction of other strong coins, with Bitcoin tokens (above) worth over $18,468
Bankman-Fried apologized on Twitter for the situation and said it would take some time for the smoke to settle.
He assured that investors would be protected during the bailout and thanked Zhao and Binance for saving his company.
Zhao, the richest man in the crypto market, is about to expand his empire with the addition of FTX to Binance.
After seeing his peak net worth drop from $97 billion in January to $10 billion in the summer, Zhao’s wealth has seen a small rebound. His net worth is currently estimated at $16.4 billion.
Over the summer, Bankman-Fried saw its fortunes plummet 66 percent since it peaked at $26 billion.
He had put $16 million into Super PACs in April, making him one of the largest donors to outside groups, and said he expects to give more than $100 million to Democrats in the next presidential election.