Crypto king or conman: is Sam Bankman-Fried about to be sent down for a century?

Sunil Kavuri is not a novice investor. Sure, he hasn’t always been involved in finance: 20 years ago, he was a model. He and his identical twin brother were the stuff of local newspaper human-interest stories, straight-A lads from Rugby in Warwickshire who got firsts in economics, were both on the way to do master’s degrees in finance at Cambridge and got picked up by O2 to do the adverts for Big Brother. You might remember the ad: two floppy-haired guys horseplaying on a sofa.

After that, though, Kavuri worked for Deutsche Bank, Morgan Stanley and then JP Morgan, leaving in 2012 to do his own investing. In 2015, he started investing in cryptocurrencies, mainly bitcoin, which he saw as “digital gold”: “It has all the attributes of gold, but it’s easier to store, so it’s better than gold.” The premise of bitcoin is that the supply is fixed at 21m, so it’s a finite resource. “I saw bitcoin as a better, more portable version,” he says. “It has finance supply, it’s perfectly divisible, it’s fungible.”

But then, in the autumn of 2022, the value of crypto nosedived. As a creditor of the crypto exchange platform FTX, founded by Sam Bankman-Fried, Kavuri lost $2.1m (£1.8m). He is trying to retrieve those funds as part of a class-action lawsuit.

Bitcoin Is a Delusion That Could Conquer the World

A bar of gold. A disk of iron. A chain of beads. A card of plastic. A slip of cotton-linen paper. These things are worthless. One cannot eat them, or drink them, or use them as a blanket. But they are valuable, too. Their value comes from the simplest thing. People believe they are money, and so they are.

If every currency is a consensual delusion, then bitcoin, a digital cryptocurrency that changes hands over the internet, feels more like a consensual hallucination on psychedelic drugs. The concept of bitcoin was born in a detailed white paper published in late 2008 by a pseudonymous “Satoshi Nakamoto.” By 2013, one bitcoin was worth $12. As of this writing, it’s worth more than $10,000. Its value has doubled in the last two months alone. For any currency’s value to increase by 100 percent in eight weeks is, to use a technical term, bonkers. If the Japanese yen or American dollar did the same, their economies would plunge into an infernal deflationary spiral.