In January 2022, Sam Bankman-Fried was riding high. His Bahamas-based FTX had just raised $400 million from prominent venture capitalists at a $32 billion valuation. A few weeks later, when Forbes published its annual World’s Billionaires list, SBF, as he’s known, was crypto’s second-wealthiest person, worth $24 billion.
Now, Bankman-Fried is likely broke, and awaiting trial. Before he was arrested in the Bahamas, SBF told several media outlets his bank account was down to $100,000, and that he was “not sure” how he’ll pay his lawyers. Gary Wang, FTX’s other cofounder and the company’s former chief technology officer–who entered a plea deal with the Securities and Exchange Commission–has also seen his fortune, once estimated at $5.9 billion, wiped.
FTX’s demise was a fitting end to a year of wealth destruction in the cryptocurrency and blockchain sector. The post-pandemic economic shock, which triggered inflation and rising interest rates, sucked capital out of the speculative crypto ecosystem. Prominent firms imploded, from the $40 billion collapse in May of algorithmic stablecoin TerraUSD, to the crypto hedge fund Three Arrows (which declared for bankruptcy in July), to the bankruptcies of interest-bearing lending businesses Voyager Digital, Celsius and BlockFi. Bitcoin, the largest cryptocurrency and an industry bellwether, is down 65% from its $69,000 peak in November 2021. Meanwhile some $2 trillion of market value has fled digital assets for safer pastures.
As a result, 17 of crypto’s wealthiest investors and founders have collectively lost an estimated $116 billion in personal wealth since March, according to Forbes’ estimates. Fifteen of them have lost more than half their fortune over the past nine months. Ten have lost their billionaire status altogether.
“We’re now at the breaking point in crypto where everyone will have to take a pause and say, ‘Okay, we’ve seen a ton of economic wealth destroyed in the last couple of months, we need to start taking this seriously,’” says Matt Cohen, founder of Ripple Ventures, a venture capital firm. “A lot of blockchain technologies and crypto companies built solutions for problems that didn’t need fixing, and I think we’re now going to have a hard reset.”