Sam Bankman-Fried’s Late-Night Move and How the FTX House Crumbled

Late last night, Sam Bankman-Fried sent a message he never thought he would send. He reached out to rival Changpeng Zhao, known as CZ, CEO of crypto trading platform Binance and asked him if he would buy—and save—FTX, a person close to the deal told me. By early in the morning Pacific time, he had his answer. He would be selling his startup, which had helped transform the world of crypto investing and been valued at an astonishing $32 billion by the world’s leading private investors, for nothing. The more than $1.5 billion in financing he had raised was going “Poof!”

When journalists have suspicions about a business, they like to call it a “house of cards.” It’s a vivid analogy that basically means “We can’t tell you what is wrong with the business, but something is.” It honestly irks me when people throw the expression around without doing the work to explain what’s happening, but it is also important to follow one’s instincts. And for a while now, a lot of people have had a funny feeling about crypto and specifically about FTX, one of the world’s most popular places to buy and sell cryptocurrencies. Specifically, the thing that didn’t smell right was FTX’s relationship with crypto trading fund Alameda Research, which Bankman-Fried also controlled.