29 year old billionaire Sam Bankman-Fried was fed up with how crypto traded, so he did something about it: he started his own crypto exchange, FTX, which now processes $10.7 billion in trades per day.
His exchange lets people not only trade equities 24 hours a day, but also bet on props like whether or not Donald Trump will retake the presidency in 2024, according to a recent profile by the Wall Street Journal. It became popular due to Bankman-Fried's commitment to donating 1% of its revenue to charity - and keeping the exchange reliable.
Recently, FTX made news when it bought the naming rights to the former American Airlines Arena - the home of the Miami Heat - for $135 million. The offshore exchange is "far more exciting" than Coinbase to many crypto traders because it operates outside the reach of U.S. authorities and offers both cryptos and derivatives.
It was the first to offer tokenized stocks, which allows people to track the value of shares of companies like Tesla and GameStop outside of regular trading hours. These tokenized stocks are still only a small market, but crypto fans see them as a way to break stocks free of normal trading hours.
Bankman-Fried is hopeful regulators eventually allow his products: “Nothing operates 9:30 a.m. to 4 p.m., five days a week. There’s actually a lot of room to innovate in stock exchanges.”
Skeptics point out that, not unlike crypto itself, the products are new and should be taken with a grain of serious salt. Lee Reiners, executive director of the Global Financial Markets Center at Duke University, said: “These are very novel and complex instruments. These things are destined to blow up at some point, and then FTX will be in the hothouse with regulators and law enforcement.”
FTX's tokens can "be redeemed for the actual underlying shares at a regulated German investment firm, CM-Equity AG, which helps keep the price of the tokens in line with the actual stocks," the Journal reports.
Rich Rosenblum, president of GSR, a crypto trading firm, said of FTX: “They’ve certainly pushed the envelope in terms of products and the speed with which they’ve been able to launch products.”
If they were to trade in the U.S., there's a high chance they would be regulated by the SEC. Since the exchange is overseas, it isn't beholden to U.S. regulations yet.
However, this doesn't mean it won't eventually be. The Journal points out that last October, "federal prosecutors charged the founders of BitMEX, another offshore crypto exchange, with violating anti-money-laundering laws because of its failure to register with U.S. regulations while allegedly turning a blind eye to Americans using its platform."
It's tough not to think FTX could be subjected to similar scrutiny.
FTX says it has processed $10.7 billion in trades on an average day, which makes it one of the world's top crypto exchanges. Coinbase, for comparison, has handled about $2.6 billion in daily trades this month - but doesn't offer derivatives.
FTX has made Bankman-Fried one of the world's richest people, with an estimated net worth of $8.7 billion, much of which is made up of his stake in FTX and various tokens.
The 29 year old formerly studied physics at MIT and almost wound up with a career in academia. He launched his own crypto firm, Alameda Research, in 2017 during the early stages of the bitcoin boom. His wealth has allowed him to support organizations like OpenAI, which focuses making sure AI stays an asset - and not a threat - to the human race.
He also donated to President Biden's campaign. He said of the current President: “I’d love to talk to him about crypto regulation. But I don’t think he gives a shit.”
