FTX founder Sam Bankman-Fried triggered downfall by badmouthing crypto rival: sources

Three weeks before the implosion of FTX, its disgraced founder Sam Bankman-Fried bad-mouthed a rival crypto mogul at an investor conference in Saudi Arabia — an indiscretion that sources say may have triggered his downfall, The Post has learned.

The 30-year-old Bankman-Fried — whose FTX fund filed for bankruptcy on Friday, obliterating his $16 billion personal fortune — had traveled to Riyadh for the annual “Davos in the Desert” financial summit on Oct. 25 – Oct.27, where he was angling to raise money from some of the world’s deep-pocketed investors.

But in private meetings at the event, Bankman-Fried, known as “SBF” in crypto circles, raised eyebrows as he “trashed” ChangPeng Zhao — the China-born CEO of Binance who, in addition to being one of Bankman-Fried’s early backers, is a highly respected tech founder in the region.

That’s despite the fact that Zhao — known as “CZ” among crypto enthusiasts with a net worth of $17.4 billion, according to Forbes — was at the conference, too. When Middle East investors tipped off Zhao that Bankman-Fried had slammed him behind his back, Zhao was furious, according to a crypto observer.

“He pulled the pin out of the grenade on this trip,” a source said of Bankman-Fried’s trash-talking of Zhao.

It couldn’t immediately be learned what Bankman-Fried allegedly said about his rival, but competitive tensions between the two have brewed since last year when, according to a Reuters report, FTX lawyers claimed Binance mucked up its efforts to set up a subsidiary.

Earlier this month, Coindesk published a report that Bankman-Fried’s investment firm Alameda Trading’s balance sheet was relying on FTX’s cryptocurrency token, known as FTT.  Around this time, Zhao sold a massive trove of FTT, which ultimately triggered FTX’s bankruptcy. 

“It’s not a coincidence he goes to the Middle East and comes back bankrupt,” the source speculated. “The trip created the unraveling of the fraud. There’s a direct causation between that marketing junket and Bankman-Fried’s downfall.”

SBF and CZ have lately traded jabs online. Last month, Bankman-Fried tweeted — in response to a post praising Zhao — “excited to see him repping the industry in DC going forward! Uh, he is allowed in DC, right?” — an apparent reference to reported probes of Binance by US regulators over possible illegal trades of crypto derivatives, as well as alleged insider trading and money laundering.

Zhao, meanwhile, wrote in a June 23 blogpost that FTX’s recent bailouts of other crypto firms, “don’t make sense,” adding a bit of advice for Bankman-Fried: “Don’t perpetuate bad companies. Let them fail. Let other better projects take their place, and they will.”

In an interview with the New York Times on Monday, Bankman-Fried admitted that he had-bad-mouthed Zhao during meetings with US officials in Washington — and also admitted that attacking Zhao “was not a good strategic move.”

“I was pretty frustrated at a lot of what I saw happening, but I should’ve understood that it was not a good decision of me to express that,” Bankman-Fried told the paper without elaborating.

It’s not clear whether Zhao had caught word of Bankman-Fried’s attacks in Washington, or whether the two men spoke to each other at the so-called Future Investment Initiative sponsored by Saudi Arabia’s $600 billion Public Investment Fund.

Both crypto evangelists had nabbed an invitation to Crown Prince Mohammed bin Salman’s exclusive dinner, where they hobnobbed with bank CEOs, private equity titans, and top government officials.

But crypto observers wonder whether when Zhao heard the news in Riyadh, he decided to take action.

Zhao bought 20% of the exchange for $100 million in 2019 with the plan “to grow the crypto economy together.” But Binance quickly came to see FTX as a competitor and Bankman-Fried decided to buy back his stake from Zhao for $2 billion in 2021. Bankman-Fried paid Zhao partly in FTT, which gave Zhao a roughly $580 million stake in FTX.

Zhao tweeted on Nov. 6 that he had decided to liquidate his position, “due to recent revelations.” The price of FTT crashed, creating a run on FTX’s holdings that quickly forced it into bankruptcy.

“I’m glad it happened now and not in 6 or 12 months when billions more had been poured into it,” a source said.

Over the last few years, Zhao has deepened his relationships in the Middle East. He bought a home in Dubai, and secured licenses for Binance to operate in Dubai, Abu Dhabi, and Bahrain. At the Riyadh event, Zhao spoke at a fireside chat entitled, “The aspiring Web3 gateway.”

Bankman-Fried, meanwhile, had been asked to speak on a panel, “Vision: Innovations with defining impacts on humanity.” According to the program, “True innovators do not simply improve old systems; they imagine new realities. When addressing today’s pressing problems, innovators are not bound by the limits of yesterday’s tools.”

A spokesperson for FTX did not respond to request for comment. A spokesperson for Binance did not respond to request for comment.