In mid-July of 2021, Pascal Gauthier made a call to the 29-year-old who’d wowed investors and the media by building a big trading platform at warp speed, and emerged as the crypto field’s most charismatic lobbyist: Sam Bankman-Fried.
“I wanted to learn what his secret sauce was, to grow his business so quickly,” recalls Gauthier, CEO of Ledger, a leading purveyor of hardware wallets for securely storing digital currencies. (You can read more about that torrid growth and the documents showing how Bankman-Fried sold his vision to VCs here.) But as their conversation progressed, Gauthier became startled. SBF was describing a model for scaling an enterprise that, in retrospect, contradicted everything Gauthier had learned in over two decades as a successful, serial entrepreneur. “It all sounded like a classic recipe for disaster,” he recalls. “I was wondering, ‘He’s a myth; he’s backed by the best investors; he’s got a valuation in the tens of billions. What don’t I understand?’ But it looked like he was building a great business, and we thought it was great to partner with them.”
Gauthier relayed the incident to Fortune this week in a hotel meeting room in Manhattan’s Nolita district, on a visit from Ledger’s headquarters in Paris. “I could tell he was playing with his computer, or doing something else at the same time we were talking, but he also was lucidly telling me about his own business; it was obvious he could multitask,” says the black-bearded, stocky CEO eight of whose fingers flash folkloric rings. “He showed no curiosity about Ledger or myself on the call. He was pitching his story about growing a great business superfast.”
But Bankman-Fried, or “SBF” as he’s called in crypto circles, described how he could achieve something that Gauthier had never seen before—run a major financial institution as a kind of permanent startup. “He was adamant that he could do it with the very few employees he already had; the number I recall was something like a hundred,” says Gauthier. “He was saying he could build a business with far fewer people than his competitors. That was my number one surprise.” The number one shocker: SBF’s assertion that “maybe one day we’ll buy Goldman Sachs,” a boast that he also made publicly. Gauthier reflected, here’s a guy with $1 billion in revenues, and he’s going to buy one of the world’s biggest investment banks with a market cap of over $100 billion and revenues of $50 billion?
Many months later, Gauthier had still more reason to puzzle over how such an unorthodox, unproven approach could apparently work so brilliantly. “I later read that Sam was pitching investors around creating a worldwide financial super app where people could do anything with their money, and maybe that was the reason he got to the $32 billion valuation. And apparently, he’s going to do this with so few people! I thought, ‘To do that you’d need thousands of people!’” Gauthier notes that he wasn’t predicting FTX’s collapse. He was simply amazed by the gulf between SBF’s ambitions and the number of people he’d put behind that superambitious execution.
For his part, Gauthier followed a more traditional path in forging his own businesses. He had scaled Criteo of France into a major online advertiser that went public in 2013 at a $1.7 billion valuation, and in 2015 helped found Ledger, an enterprise with 800 employees that’s growing fast and in most years, has generated strong profits. So SBF’s wild plans left a lasting impression. “If I said Ledger was thinking of buying Goldman Sachs, people would laugh,” notes Gauthier. “But somehow, when SBF said he might buy Goldman, the financial world nodded and thought it was possible.”
Ledger’s engineers visit FTX in the Bahamas, and get a jolt
In mid-2022, Gauthier dispatched a team of engineers to install the systems at FTX’s offices in the Bahamas that would enable his clients to trade on SBF’s burgeoning platform. Ledger’s product is a wallet that runs on a hardware piece the size of a butane lighter, called the “Ledger nano,” sold at Best Buy, that plugs into your smartphone or connects via Bluetooth. To send crypto to another wallet or an exchange—to activate the “key” that releases the coins—customers must enter a private “pin code,” just as you punch a pad to buy stuff with a bank debit card. The Ledger wallets are built for individuals only. They’re a long-proven platform for keeping customers’ Bitcoin and other crypto holdings secure. Unlike trading platforms that custody coins, Ledger runs a decentralized system.
The engineers reported back a system and a culture that was the antithesis of the rigorous environment that Gauthier had fashioned at Ledger. “We found that their business practices were much looser and very different from ours,” he says. “What I saw before the fall was an organization that simply worked completely differently from anything I’ve ever seen.”
Gauthier notes that his team could never engage with either FTX or SBF on deep conversations around security, and especially the type of governance that would be appropriate for a large exchange. Ledger offers a proven product for the institutional market called Ledger Enterprise. But Gauthier and SBF never entered into what Gauthier termed “an educated discussion” around security. “I was surprised that they failed, but I was also astonished that they couldn’t engage in real conversation about the security of the exchange and the security of their governance.”
A big lesson from the meltdown, Gauthier thinks, is that security in the crypto world is even more crucial than for banks and brokers. And yet, the digital players are much more blasé about protecting client assets than in mainstream finance. “The crazy kids in the garage approach doesn’t work well with blockchain technology,” he says. “You need governance and risk management and all the things crypto people think are boring.” SBF’s magnetism took the world’s eyes off the paramount role of those safeguards. For Gauthier, the missing billions will provide a durable reminder—the reminder that must be heeded for crypto to prove a force for the future.
