Wednesday 16 November 2022 10:08 PM The man who lost £27bn in a week! And may take cryptocurrency down with him, ... trends now

When a Gulfstream G450 private jet took off from the Bahamas capital of Nassau, bound for Argentina late last week, it briefly became the most heavily tracked plane in the aviation world.

For many were convinced it belonged to ‘Crypto King’ Sam Bankman-Fried and was whisking him off — like a fugitive from justice — to a new life in South America.

The digital currency tycoon in question later denied it was his plane, although he hasn’t yet addressed another rumour: that he and two colleagues were stopped on the tarmac at Nassau Airport as they tried to take the plane to Dubai, a country with no extradition treaty with the U.S.

Such melodrama is the stuff of a Hollywood thriller, but entirely understandable given that 30-year-old Bankman-Fried, who until very recently was hailed as the billionaire golden boy of the cryptocurrency world, is now accused of being at the centre of one of the most stunning financial frauds in history.

The catastrophic unravelling of FTX, a cryptocurrency business founded three years ago by Bankman-Fried that went from being valued at $32 billion to virtually nothing in just a few days, is a business tragedy for the ages.

And it’s certainly one for this particular age, involving as it does the deeply shady world of cryptocurrencies, a woke bunch of bed-hopping, digital whizz-kids holed up in luxury in a Caribbean tax haven, and an endless parade of grasping A-list dupes who fell for their hype.

Even Washington — right up to the White House — has been implicated as the liberal causes which Bankman-Fried generously funded included the Democratic Party.

Joe Biden’s 2020 election campaign received $5 million and Bankman-Fried — or SBF as he’s known — showered a jaw-dropping $40 million on favoured candidates (most of them Democrats) in last week’s congressional midterms.

In hindsight, this generosity, not to mention SBF’s philanthropic pledges to give away his fortune, look to many like cynical ploys to curry favour and respectability for a payment system famously beloved of criminals and terrorists anxious to cover their tracks.

In May, his political friends invited SBF to address Congress on, of all things, relaxing restrictions on his industry.

Cryptocurrencies such as Bitcoin have been hailed as the future of money and involve the creation of digital tokens that exist only online and that are beyond the control of meddling banks and governments. Rishi Sunak has said he wants the UK to be an international cryptocurrency capital.

However, heavily based as it is on secrecy and avoiding regulation, the controversial industry has struggled to win mainstream acceptance. Even FTX wasn’t licensed to operate in either the U.S. or UK (a fact that, regulators warn, will make it very difficult for British people who lost money in the company to get any back).

Now FTX has gone into liquidation and it’s hard to think of any other multi-billion-dollar company that’s crumpled in this way so terrifyingly quickly — Bloomberg News called it ‘one of history’s greatest-ever destructions of wealth’.

And the carnage may only have begun as the scandal has tipped the entire cryptocurrency world into crisis.

There are fears that what Bankman-Fried’s main rival has called ‘cascading contagion’ will spread to a cryptocurrency industry that had already lost two-thirds — about $2 trillion — of its value in the past year and seen Bitcoin’s worth shrink to little more than a quarter of what it was a year ago.

Governments around the world were already deeply suspicious of the crypto world and its Wild West reputation — and with good reason, many say — before the seismic events of the past few days.

Whether or not the whole house of cards does now collapse, the disaster has spectacularly illustrated the two defining qualities — greed and gullibility — of the Bitcoin craze. FTX has admitted that more than a million people may have lost money that appears to run into the billions.

And it could potentially take far more than the cryptocurrency world with it. Ominously, many have compared its demise with the collapse of Lehman Brothers, America’s fourth largest investment bank, in 2008.

The firm went bankrupt after being involved in the subprime mortgage crisis that triggered a collapse in the U.S. housing market and a worldwide recession.

What’s particularly mortifying for the cheerleaders of crypto-currencies was that Bankman-Fried and FTX — an exchange that allowed customers to store digital currencies and, if they wanted, trade them — were almost universally regarded as one of the few stable rocks in this ridiculously volatile industry.

Behind the studied scruffiness — wild hair, a wardrobe of T-shirts and shorts, and an endearingly nerdish lifestyle — SBF assiduously courted the powerful and famous as he burnished his image as the principled white knight of cryptocurrency.

As recently as April, he drew luminaries, from Tony Blair and Bill Clinton to supermodel Gisele Bundchen and actor Orlando Bloom, to a glamorous crypto convention in the Bahamas.

As well as coming across as spectacularly bright in the shambolic uber-nerd way that investors reportedly find reassuring, Bankman-Fried — the son of Left-wing law professors from California — had another string to his bow: he insisted he wanted to use his billions not to buy a fleet of Lamborghinis and yachts like most in his business but to save the world by giving much of it away to good causes.

Bankman-Fried claimed he wasn’t interested in riches and luxury, posting online pictures of the giant beanbag on which he would sleep beside his desk and telling interviewers that he paid himself only $100,000 a year and drove around in a Toyota Corolla. ‘I don’t want a yacht,’ he proclaimed piously.

In reality, a yacht would have been cheaper than the £32 million penthouse where it’s now emerged he and his senior team lived and worked on the Bahamas island of New Providence.

Billed as the ‘ultimate in waterfront living’, the five-bedroom property — part of the glitzy 600-acre Albany resort — was bought with the £62 million his company spent on property this year.