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From the Forbes List to the Abyss: Power Runs Out for the Three Crypto Visionaries


Highlights: From the Forbes List to the Abyss: Power Runs Out for the Three Crypto Visionaries. Do Kwon (TerraLuna), Sam Bankman-Fried (FTX) and Changpeng Zhao (Binance), once rising stars in the industry, have left their leadership positions due to illegal practices. December 2021. Bitcoin just hit all-time highs above $69,000. The industry's bad news applies to its managers as well as to its users. Winning over politicians becomes a priority until something goes wrong.

Do Kwon (TerraLuna), Sam Bankman-Fried (FTX) and Changpeng Zhao (Binance), once rising stars in the industry, have left their leadership positions due to illegal practices

December 2021. Bitcoin just hit all-time highs above $69,000. The specialized portal Coindesk awards the title of most influential man in the crypto world to Californian Sam Bankman-Fried (SBF), head of the FTX trading platform. Also on the list are Korea's Do Kwon, founder of the digital currency Luna, and Chinese-born Canadian Changpeng Zhao (CZ), head of Binance, FTX's big competitor. All three caught the attention of Forbes magazine, which chose Kwon among the 30 most important personalities in Asia under the age of 30, and placed SBF and CZ in positions of honor in its ranking of the richest on the planet.

These are days of wine and roses. The American runs his business from a mansion in the Bahamas with a group of friends. Some media compare him to the famous investor Warren Buffett. And nothing in abundance: he is the second richest man in history before his 30th birthday, specifically 22,500 million dollars, only behind a certain Mark Zuckerberg. Canada's CZ is not far behind. He climbs the ranks day after day, and Forbes credits him with a sum of $65 billion. Above the Spaniard Amancio Ortega and his empire Inditex. "I don't know how much money I have," he will say in an interview with EL PAÍS in April 000.

All three tweet with verve and promise a better life for those who place their savings in the incipient universe of cryptocurrencies, called upon to wrest the monopoly of money from central banks. "The lunar cycle has only just begun," says Kwon, who after graduating from Stanford University in California, where he studied computer science, worked for Apple and Microsoft.

A fan of video games, some Sundays he shares with his million followers on X (then Twitter) photographs in which he appears playing Starcraft, a futuristic adventure that pits three races against each other for control of the galaxy. Luna's revaluations are making mountains of money for those who bought it, fueling his reputation as a visionary genius. The world seems like a kind place and they are young innovators. SBF, the son of two prestigious law professors, graduated in Physics from the renowned Massachusetts Institute of Technology (MIT), also escapes by playing Starcraft and League of Legends.

Starcraft Sundays

— Do Kwon 🌕 (@stablekwon) March 6, 2022

The crypto aristocracy thus presents itself to the world with a certain nerdy aesthetic that is not out of tune with the new digital ecosystem of Silicon Valley and the addiction to screens. Their goal is ambitious because their raw material is coveted: money, which they seek to push to an unprecedented technological leap. "The most exciting thing about cryptocurrencies is that they will facilitate the Great Migration of human activity from the physical world to the internet," Kwon says.

Some of the most prominent men in successful companies, such as Elon Musk (Tesla) or Jack Dorsey (co-founder of Twitter), as rich as they are eccentric, not only give them their blessing, but promote them on their social networks. And as is inevitable with any business that involves quick profits, Wall Street enters the scene: the American platform Coinbase begins trading and puts investment in cryptocurrencies within the reach of stock market regulars.

The crypto ascent has its rebound effect. An army of detractors that is joined by numerous Nobel laureates, central bankers and economists. And in the midst of growing regulatory hurdles, intense lobbying begins. CZ is seen with ministers and heads of state from all over the world on a frenetic tour. He is photographed with the Frenchman Emmanuel Macron – to whom he promises to place his European headquarters in Paris in exchange for a friendly regulation. And of course with the Salvadoran Nayib Bukele, convinced that he can turn the Central American nation into a global cryptocurrency powerhouse.

SBF, meanwhile, pulls out his checkbook to sign sports stars, sponsor NBA stadiums and advertise in the overpriced SuperBowl advertising intermission. And it seeks to expand its influence by showering cash on the campaign of then-Democratic candidate Joe Biden, becoming, with $5.2 million, its second-largest donor, behind only former New York Mayor Michael Bloomberg's $56 million. Winning over politicians becomes a priority.

Until something goes wrong.

December 2023. Bitcoin is worth a third less than in its heyday, although it seems to be waking up from a dark period of price declines full of bad news. The so-called crypto winter. The industry's speed to change course applies to its managers as well. None of the members of the promising triumvirate is in the front line to see it anymore. Do Kwon has been in police custody in Montenegro for eight months after being arrested at the country's airport in a desperate attempt to prolong his escape. And the courts have just authorized his extradition, although no one knows where. Both his country of origin, South Korea, and the United States claim him for having defrauded 40,000 million dollars and left in ruin the millions of investors who bought Luna and in May 2022 saw its value go to zero in just a few days.

Sam Bankman-Fried, on March 30 upon his arrival at the federal court in New York.Peter Foley (EFE)

FTX went bankrupt a year ago. And there were those responsible and negligence. Sam Bankman-Fried was arrested in the Bahamas, extradited to the U.S., and faces a maximum sentence of 110 years in prison for being responsible for a $10 billion hole. The testimonies of his team and the auditor who took charge of the restructuring of the firm to try to recover as much as possible, speak of the platform not maintaining the proper books and records, nor the security controls. And software was used to hide the misuse of customer funds, with which homes and personal items were purchased.

It all boiled down, in the words of the auditor, to "a very small group of people with no experience or training." An ocean liner that was too big for them ended up in their hands and sank. Users have not gotten their money back, and SBF awaits the outcome of the trial at Brooklyn's Metropolitan Detention Center in New York, where he shares space with other high-profile detainees, such as former Honduran President Juan Orlando Hernández, accused of cocaine trafficking. There, in prison, the bargaining chip is something else. According to the Wall Street Journal, Bankman-Fried paid for a haircut with cans of mackerel.

Changpeng Zhao, former CEO of Binance, the world's largest cryptocurrency exchange, leaves the Seattle courthouse on Nov. 21. David Ryder (Getty Images)

The best off of the three (so far) is Changpeng Zhao. Especially since he's still free. The U.S. justice system forced him to leave his position as CEO of Binance, and in a settlement with the Department of Justice, he agreed to pay a $50 million fine after pleading guilty to violating money laundering laws in the U.S. Binance will also have to dig deep into its pocket and pay about 4,000 million euros. But the sanction does not jeopardize the survival of the company, the absolute global leader in crypto transactions, for which it charges lucrative commissions in return.

Zhao, a leader in the crypto community with 8.7 million followers on X, will even be able to maintain shareholder control of the company. His punishment, therefore, is to lose the managerial power that led him to continually rub shoulders with political and business leaders. He says he is surprised by his sudden change of life. "The first thing I'm going to do is take a break. I haven't lost a single day in the last six and a half years. I'm 'enjoying' all the free time I have all of a sudden," he tweeted shortly after his forced departure was announced.

Their one-time rivals Do Kwon and Sam Bankman-Fried, stripped of their fortunes and their companies, and hated by the millions of customers they left without savings, would like their biggest concern to be something as trivial as what to do to fill a white-tinted agenda with activities.

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Source: elparis

All business articles on 2023-12-10

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