At least WeWork had flashy buildings to flaunt for the billions of dollars ex-CEO Adam Neumann raised. But what did Sam Bankman-Fried have to show?
It was probably the FTX exchange itself.
The very product Bankman-Fried paraded around the world to raise his billions and build political connections was error-prone, slow and often lagged during times of market volatility.
Customer service was said to be non-existent. An online complaint form was linked to a general email address that seldom replied.
FTX positioned itself as “built by traders, for traders” – given SBF’s and Ellison’s past work experience with Wall Street quant firm Jane Street – and quickly found a following in the depths of the previous bear market.
It went from processing a few thousand dollars in trading volumes after its 2019 launch to billions of dollars at its 2022 peak. These surging volumes and his company’s soaring valuation boosted Bankman-Fried’s ego, as he envisioned creating a one-stop exchange to trade anything from bitcoin to orange juice.
An army of venture capitalists, such as Sino Global Capital and Sequoia Capital, hyped the founder and exchange up. Crypto influencers on X (née Twitter) flashed affiliate links that gave discounts on fees. The unsuspecting retail audience bought into the dreams.
Another facet that boosted growth was Bankman-Fried’s whole Effective Altruism shenanigans. Loved by mainstream media and investors alike, the young "boy genius" wanted to eventually donate everything he made to charity.
Such issues were echoed on other social media sites and forums.
“Yeah, as an exchange FTX was pretty terrible,” dcolkitt, a user from the popular technology forum Hacker News, claimed. “The matching engine was notorious for being high latency, unreliable, and having all sorts of undocumented issues.”
See also: Sam Bankman-Fried Blames Everyone but Himself for FTX's Collapse | Opinion
“Every algo trader there will tell you horror stories about trying to cancel an open order, getting a cancel confirmation, and then getting notified that the order was executed. Sometimes seconds later,” dcolkitt added.
“Occasionally sending out zero balances was another FTX special,” said another user, Vgatherps.
In hindsight, we now know SBF’s hedge fund Alameda was often the entity on the opposite side of every FTX trade, which goes far in explaining the poor fills, the lag experienced by traders, and just about everything that was going wrong at the exchange. The firm, after all, had a front-seat view to all trades on FTX – which contributed to the $1 billion in claimed revenues it made in 2020.
All this raises the question: Did anyone even use FTX before investing?