Sam Bankman-Fried sold $300 million FTX stake after 'meme' fundraiser
Shamed FTX founder Sam Bankman-Fried sold $300 million stake in failed crypto company amid a ‘meme’ fundraising blitz that raised $420.69 million from 69 investors in Elon Musk-inspired joke about sex and weed
- Bankman-Fried offloaded a $300 million stake in FTX as the company raised hundreds of millions of dollars from investors including BlackRock
- His sale came as the firm held a ‘meme’ fundraising round which secured $420.69 million from 69 investors – references to marijuana and sex
- Elon Musk has cracked similar jokes: he once suggested taking Tesla private for $420 per share and his Twitter bid valued the company at $54.20 per share
- Bankman-Fried’s sale is controversial because investors were told money would be used to grow FTX, improve user experience and help engage with regulators
- Details emerged after a bankruptcy filing said FTX has a ‘complete absence of trustworthy financial information’
FTX founder Sam Bankman-Fried sold a $300 million stake in his failed cryptocurrency firm in the same month that the company raised $420.69 million dollars through a ‘meme’ fundraising blitz that referenced sex and marijuana.
The company secured the money in October 2021 from a series of high-profile investors including BlackRock and the Ontario Teachers’ Pension Plan.
The amount – exactly $420,690,000 from 69 investors – was described as a ‘meme round’ because 420 is a reference to marijuana and 69 is a sex position.
Elon Musk has previously made similar jokes: he once suggested taking Tesla private for $420 per share and his Twitter bid valued the company at $54.20 per share.
Bankman-Fried sold a stake in his company worth $300 million in October 2021, the Wall Street Journal reported.
The sale is controversial because FTX told investors the money would help grow the business. Instead, Bankman-Fried pocketed around three quarters of what was raised.
The $420.69 million was secured as part of a wider, six-month fundraising campaign that netted about $2 billion. The collapsed company, which has filed for bankruptcy, was valued at around $25 billion at the time. Other investors included the Singapore sovereign wealth fund.
Details of the $300 million sale came as:
- The new FTX boss, appointed to oversee its bankruptcy, said the firm’s ‘complete failure of corporate controls’ is the worst he’s ever seen
- SEC chairman Gary Gensler faced scrutiny over his links to Bankman-Fried after details surfaced of meetings between the pair
- Bombshell court filings claimed the Bahamas government ordered Bankman-Fried to hack FTX systems and transfer assets to the island nation
Bankman-Fried, pictured with supermodel and former FTX ambassador Gisele Bundchen, sold a $300 million stake in FTX after the company held a ‘meme’ fundraiser which raised $420m
Elon Musk, seen puffing a joint on the Joe Rogan podcast, has also made joke references to weed when talking about stocks in his companies. He was fined $20 million over a 2018 tweet which falsely claimed Tesla might be taken private for $420 a share.
Investors were also told their money would be used to improve user experience and help it to work with more regulators.
The WSJ said it reviewed FTX financial records which showed Bankman-Fried’s sale.
Bankman-Fried apparently justified the sale to investors at the time by telling them it was a partial reimbursement for money he spent to buyout Binance’s stake in FTX.
Binance is a rival trading platform.
It’s not clear what Bankman-Fried did with the $300 million. The WSJ said audited financial statements from FTX for 2021 said the money was retained by the company for ‘operational expediency’ on behalf of a ‘related party’.
Charles Elson, a professor at the University of Delaware who studies corporate governance, said: ‘It just isn’t a great sign.
FTX was valued at around $25 billion during the meme fundraiser and investors included BlackRock and the Singapore sovereign wealth fund. As the cash poured in, Bankman-Fried sold a $300 million stake in FTX
‘Anytime you see a founder selling shares in a secondary offering, you have to really ask them pretty tough questions.’
Several crypto firms have since been bracing for a fallout from the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.
Elon Musk was slapped with a $20 million fine by the SEC in 2018 after he tweeted that he could take Tesla, his electric car company, private for $420 a share.
The world’s richest man’s $44 billion takeover of Twitter in October also valued the company at $54.20 per share – another reference to weed.
The rapid rise and swift downfall of crypto exchange FTX
Cryptocurrency exchange FTX has collapsed.
Here is a history of FTX since its foundation in 2019:
2019:
May – Former Wall Street trader Sam Bankman-Fried and ex-Google employee Gary Wang founded FTX, the owner and operator of FTX.COM cryptocurrency exchange.
2020:
August – FTX acquired mobile portfolio tracking application, Blockfolio for $150 million.
2021:
July – A $900 million funding round valued FTX at $18 billion.
September – FTX signed a sponsorship deal with Mercedes’ Formula 1 team.
October – FTX raised capital at a valuation of $25 billion from investors including Singapore’s Temasek and Tiger Global.
2022:
Jan. 27 – FTX’s U.S. arm said it was valued at $8 billion after raising $400 million in its first funding round from investors including SoftBank and Temasek.
Jan. 31 – FTX raised $400 million from investors including SoftBank at a valuation of $32 billion.
Feb. 13 – Larry David stars in Super Bowl commercial for FTX
April 26 – April 29 – Bankman-Fried is joined by celebrities including Tom Brady, Katy Perry, Tony Blair and Bill Clinton and the Crypto Bahamas conference.
June 4 – FTX signed a reportedly $135 million sponsorship deal for naming rights of the Miami Heat’s home court.
July 1 – FTX signed a deal with an option to buy embattled crypto lender BlockFi for up to $240 million.
July 22 – FTX offered a partial bailout of bankrupt crypto lender Voyager Digital. Voyager called it a ‘low-ball bid’.
July 29 – FTX said it won full approval to operate its exchange and clearing house in Dubai.
Aug. 19 – A U.S. bank regulator ordered crypto exchange FTX to halt ‘false and misleading’ claims it had made about whether funds at the company are insured by the government.
Sept. 9 – FTX’s venture capital fund said it would buy a 30% stake in SkyBridge Capital.
Nov. 2 – Crypto news website CoinDesk reported a leaked balance sheet that showed Alameda Research, Bankman-Fried’s crypto trading firm, was heavily dependent on FTX’s native token, FTT.
Nov. 6 – Binance CEO Changpeng Zhao said his firm would liquidate its holdings of FTT due to unspecified ‘recent revelations’.
Nov. 7 – Bankman-Fried said ‘FTX is fine. Assets are fine’.
Nov. 8 – FTT collapses by 72% as clients swamp the exchange with withdrawal requests. Binance offers a potential bailout in a non-binding deal.
Nov. 9 – Binance backs out of the rescue plan, saying: ‘As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.’
Nov. 11 – Bankman-Fried resigns as CEO and FTX files for Chapter 11 bankruptcy
Nov. 13 Police in the Bahamas announce a team from its Financial Crimes Investigation Branch are investigating whether any criminal misconduct occurred.
Nov. 15 – Bankman-Fried continues to plead with investors for money to cover the firm’s losses and tweets that he’s ‘meeting in-person with regulators and working with the teams to do what we can for customers’
Nov 17 – Document filed as part of bankruptcy proceedings lays bare the ‘complete failure of corporate controls and such a complete absence of trustworthy financial information’ at FTX
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