It is just after midnight in Hong Kong, and Sam Bankman-Fried stares at the trading data on his six monitors, watching a global cryptocurrency crash happening in real time.
Mr. Bankman-Fried, a 29-year-old from California, often works around the clock, as he was on that May evening. He naps on a beanbag set up near his computer. A folded up blanket sits on the floor. He’s worth at least $8 billion, on paper.
That is even after the downturn that started in the spring, where total global losses in the value of all cryptocurrency eventually topped $1.3 trillion. And as Mr. Bankman-Fried saw it play out, he knew his business played a role in the collapse.
Cryptocurrency — digital money not backed by any nation — is famous for its wild and frequent gyrations. But FTX, the cryptocurrency trading platform that Mr. Bankman-Fried runs, specializes in a kind of trade that was accelerating the global crash.
Most of his customers are betting on future cryptocurrency price fluctuations rather than buying and selling Bitcoin, and they are borrowing to make those bets even bigger.
It is a risky approach. But it can generate big wins.
Now, Bitcoin’s value was dropping — way down — crushing the highly leveraged bets of bullish traders on FTX and other exchanges, and forcing sales of their positions in wave after wave of account liquidations. These forced sales were helping undermine cryptocurrency prices.
Three-day moving average of the value of open Bitcoin perpetual swaps, for 10 top cryptocurrency exchanges
“In terms of price movements, the biggest part of it is liquidations,” he wrote to The New York Times on May 24 from Hong Kong.
This is precisely the type of situation that United States regulators have tried to avoid by prohibiting cryptocurrency exchanges like FTX from selling high-risk futures to nonprofessional investors in the United States. And it is why Mr. Bankman-Fried moved to Hong Kong — as he wanted to offer these products, called derivatives.
Mr. Bankman-Fried is a crypto nomad: One of a group of industry leaders who once lived in the United States or Canada and have since set up companies with bases of operation where they are to some degree beyond the reach of American regulators.
Others include Changpeng Zhao, 44, the Chinese-Canadian founder of Binance, who now lives in Singapore, and Arthur Hayes, 35, a Detroit-born trader who helped create BitMEX, which is based in the Seychelles islands.
It’s a tribe that never turns off — trading takes place 24 hours a day, 365 days a year. (Mr. Bankman-Fried said he sleeps when he has no meetings and works “the hours when this counterparty is awake and the hours when that counterparty is awake.”)
These crypto nomads have built a global playground, inspired by multiplayer online games, with “leader boards” for customers who go by aliases like Dark Crypto Lord and can win prize giveaways of Teslas or iPhones.
The highly leveraged form of trading these platforms offer…