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In May 2019, FTX, a centralized cryptocurrency exchange, was founded by MIT graduates Sam Bankman-Fried and Gary Wang. Its motto is “built by traders, for traders”, encapsulating its vision to “develop a platform robust enough for professional trading firms and intuitive enough for first-time users”. The exchange specializes in derivatives and leveraged products and supports most commonly traded cryptocurrencies.
In July 2021, FTX closed a $900 million funding round, putting the exchange’s valuation at $18 billion. Binance, a competitor that was also an investor in 2020, divested its stake in FTX the next year. In May 2022, FTX’s trading volume was over $89 billion, becoming the second biggest centralized cryptocurrency exchange that month at a 10.8% market share.
Before becoming CEO of FTX, Bankman-Fried traded EFTs, or electronic funds transfers, through quant firm Jane Street, and later pursued his interest in cryptocurrency through a cryptocurrency firm called Alameda Research in 2017. This became the foundation for FTX.
Wang built “systems to aggregate prices across millions of flights” as a software engineer at Google. When he launched FTX together with Bankman-Fried, Wang became CTO of the exchange. He currently owns approximately 16% of FTX.
In order to establish its name in the cryptocurrency services landscape, especially within the U.S., FTX has formed key partnerships to reach a broad audience of well-versed cryptocurrency individuals and newcomers.
In September 2021, a Super Bowl ad featuring the couple of professional football player Tom Brady and Gisele Bündchen was released, titled “FTX Crypto: Tom Brady is In. Are you?” In June of that year, Brady and Bündchen each took an equity stake in FTX, as well becoming an FTX ambassador and environmental and social initiatives adviser, respectively. (Later in the year, Brady would go on to launch a venture with 3 co-founders in the web3 space, Autograph.)
Football wasn’t the only sport FTX targeted in its marketing campaign, though. Like Brady, National Basketball Association player Steph Curry received an equity stake in FTX as well to serve as a brand ambassador. FTX Arena, the stadium where the NBA’s Miami Heat play, was named through a rights deal worth $135 million. Additionally, FTX reached a deal to become the official cryptocurrency exchange of Major League Baseball in 2021. To aid in brand awareness, umpires will wear FTX logos on all uniforms.
“The high-profile partners help signal that FTX is a reliable and trustworthy company,” FTX.US President Brett Harrison said. Credibility is important in the space, as scammers take advantage of growing interest in cryptocurrency investing. From January 1, 2021 through March 31, 2022, the U.S. Federal Trade Commission discovered “more than 46,000 people have reported losing over $1 billion in crypto to scams”, equating to approximately one of every 4 dollars lost to scams. Since reported losses for cryptocurrency are more than other payment methods, these partnerships are key points of FTX’s branding strategy.
Sports marketing is just the beginning of FTX’s connections with influential figures. As more lawmakers and economists discuss how to regulate digital asset trading, FTX is looking to leverage connections in political circles. “As the industry and our firm gets a higher profile, I think it becomes more and more important for us to be engaging with policymakers in D.C”, Bankman-Fried said.
In the 2020 U.S. presidential election, Bankman-Fried contributed millions to super PACs Protect Our Future and Future Forward backing President Biden. Since then, contributions have also been given to Republican campaigns, such as those of Senator Susan Collins of Maine, Senator Mitt Romney of Utah, Senator Lisa Murkowski of Alaska and Senator Ben Sasse of Nebraska.
In May 2022, FTX exceeded Coinbase, a main competitor, in its trading volume of Bitcoin. A recent Kaiko report determined that the “average trade size on FTX (~$2k) is nearly double that on Coinbase (~$1k) for the BTC-USD pair”. Through its strategic partnerships, the market share of FTX has grown from 5% to 44% in 18 months.
A recent drop in cryptocurrency prices and valuation of companies in the industry has led FTX to turn to a different channel to support their growth. “We’re now at a stage of growth where I think we’re more likely to be the buyer versus the … seller”. Brett Harrison, president of cryptocurrency exchange FTX U.S., asserted. Specifically, FTX U.S. is looking for companies to acquire a larger user base and more regulatory licenses.
FTX also does not plan on stopping its involvement in politics either. Last month in May 2022, Bankman-Fried said in a podcast Monday he might donate up to $1 billion in the 2024 U.S. presidential election. In 2022, he has already donated $23 million to a single Political Action Committee.
Beyond cryptocurrency, FTX may look to explore other areas of finance such as stock trading, with Bankman-Fried becoming the third-largest shareholder in Robinhood recently. Ultimately, it looks like FTX will continue to shake up the industry to continue its growth.
ABOUT THE WRITER
Katherine Zhang is a contributor to Identity Review from the University of California, Berkeley. Do you have information to share with Identity Review? Email us at email@example.com. Find us on Twitter.
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