Underneath Sam Bankman-Fried’s wild hair is a well-groomed tale of how a brand works

A mop of unruly hair is an unlikely symbol of a failed business enterprise, emerging as a recurring theme in the rise and plummet of Sam Bankman-Fried. The enigmatic, eccentric and empathy-challenged steward of crypto exchange FTX and sister fund Alameda Research is currently on trial for securities fraud.

Bankman-Fried’s undisciplined hair has become a metaphor for the wild decisions that directly and indirectly led to his downfall. Winding through Michael Lewis’ new book about him, called Going Infinite. It plays a supporting role in the prosecution’s narrative at the trial in New York and features on the cover of Lewis’ podcast series called Judging Sam.

A world-class fraudster? Effective altruist who just wanted to save humankind? Naive leader hood-winked by his hubris? The jury will shortly decide if his next chapter involves a prison haircut. 

If you haven’t followed the story, here’s a quick run-down. 

The misfit kid who dragged a rolling suitcase around school eventually landed a job as a high-frequency trader where he embraced a movement called Effective Altruism. Counting some high-profile acolytes in their ranks, effective altruists redistribute their wealth to tackle the biggest challenges facing humanity. But in the extreme, it can and does have a dark side of cost-benefit calculations resulting in sometimes harsh judgements about what’s good.

Bankman-Fried claims his desire to do good and help trillions of people (did I mention hubris) drove everything he did. Cryptocurrency and building a platform for people to trade it was merely a means to that end.

Alongside the exchange was an investment fund called Alameda Research, and here’s where the wheels came off. Taking FTX customers’ money without their permission for Alameda to use is, well, illegal.

Add a downturn in crypto markets, unsettling rumours about the stability of the exchange, and some terrible luck. You get a perfect storm for what happened next. 

The whole thing imploded, and Bankman-Fried traded a Bahama penthouse for a seat at the defendant’s table in a New York courtroom.

Eroding capital

Now, back to how, underneath his unruly strands, his story is also a well-groomed tale of how a brand works.

There are all sorts of ways value accumulates in a brand. The pathways of people’s experience carry it in and out with every action and decision. And value streamed in while people judged worthy what Bankman-Fried and others at FTX and Alameda said they cared about and how they seemed to put that to work. 

Startup land and technorati love to love an outlier. The more wayward, the better. Their kookiness is mistaken for savvy genius. And few were more kooky than Bankman-Fried and his crew. They even gave the WeWork guy a run for that crown.

His reputation grew, and with it, FTX’s valuation. Soon, the story was feeding itself and taking the brand to lofty heights. Bankman-Fried hobnobbed with US Presidents. He was lobbied by Anna Wintour to sponsor and walk the red carpet of the Met Fashion Gala. Designer cargo shorts, anyone? 

But (you knew there was a but coming), under the growth and publicity, they were making decisions that would inevitably bring the whole thing down and lead to bankruptcy.

In his book, Great by Choice, Jim Collins discusses an idea he calls ‘return on luck’. It’s all well to mint money when things are going your way. The trick is to do that and avoid a position where you can’t weather a turn in fortune and hit a ‘deathlike risk’. 

While allowing Alameda to strip-mine capital from FTX, Bankman-Fried never expected his short-term choices would be a problem. After all, he was smarter and playing the long game to save humanity. 

Those decisions are how, piece-by-piece, the flow of value into the brand began to reverse. Rumours started and customers lost confidence, another crucial capital. Investors lost interest and fled — more value was gone. The product was exposed for giving some people a trading advantage, breaking a promise, and eroding more value.

In the bankruptcy filing, administrator John J Ray III said: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here”. This from the man who was in charge of winding up Enron. 

Even before law enforcement moved in, Bankman-Fried, FTX and Alamanda’s brands were out of any capital left to trade. It’s curious. A business that relied on trading lost all value to trade. 

Bankman-Fried’s defence, so far, is predictable: ‘The girl did it’, sacrificing his CEO of Alameda Research and sometime girlfriend Carolyn Ellison.

The literal jury will soon be out to decide. And evidently, this week, before testifying, Bankman-Fried got a haircut.

Michel Hogan is an independent brand counsel.