Who is Sam Bankman-Fried? How did he make his money? How did he lose it?<\/p>\n\n\n\n
In just a few years, Sam Bankman-Fried went from being a relative nobody to the architect of a cryptocurrency empire whose net worth neared $30 billion. But, even quicker than his empire burst onto the scene, it crumbled.<\/p>\n\n\n\n
Continue reading for an overview of Michael Lewis’s Going Infinite: The Rise and Fall of a New Tycoon<\/em>.<\/p>\n\n\n\n\n\n\n\n You might not have heard of Sam Bankman-Fried until November 2022, when the news broke that his cryptocurrency exchange, FTX, had lost nearly $10 billion of its clients\u2019 money. In Going Infinite: The Rise and Fall of a New Tycoon<\/em><\/a> (2023), financial journalist Michael Lewis provides a rare glimpse into the inner workings of Bankman-Fried\u2019s astounding rise and fall. And, although Bankman-Fried is currently charged with various counts of fraud, Lewis suggests that the case against Bankman-Fried is less damning than outsiders believe. <\/strong><\/p>\n\n\n\n Through hundreds of interviews with Bankman-Fried and many days spent at FTX\u2019s headquarters in the Bahamas prior to and during its implosion, Lewis had unparalleled access to Bankman-Fried that yields unique insight into the situation at FTX. Moreover, as he did in other bestsellers such as Liar\u2019s Poker<\/em><\/a>, Moneyball<\/em><\/a>, and The Big Short<\/em><\/a>, Lewis uses storytelling to weave together the disparate threads of Bankman-Fried\u2019s life and career.<\/p>\n\n\n\n (Shortform note: Although Lewis received praise for his previous work in financial journalism, Going Infinite <\/em>has been met with many negative reviews. For instance, one critical review alleges that Lewis\u2019s unique access to Bankman-Fried left him infatuated<\/a> with the enigmatic character and unwilling to acknowledge Bankman-Fried\u2019s criminal activity. Another reviewer writes that, in Going Infinite<\/em>, Lewis naively tries to paint Bankman-Fried as an \u201cunsung hero\u201d<\/a>\u2014the winning formula in his books like Moneyball <\/em>and The Big Short<\/em>. Finally, one last reviewer even notes that Lewis had largely finished Going Infinite <\/em>before FTX\u2019s collapse, leaving him rushing to rewrite the book<\/a> after Bankman-Fried\u2019s downfall.)<\/p>\n\n\n\n We\u2019ll break down Going Infinite <\/em>into three main parts. First, we\u2019ll examine Lewis\u2019s account of Bankman-Fried himself, outlining his transition from an adolescent social outcast to a Wall Street trader committed to \u201ceffective altruism.\u201d Next, we\u2019ll discuss how Bankman-Fried built his cryptocurrency empire, focusing on the development of his two companies\u2014FTX and Alameda Research\u2014and his uses for his newfound wealth. Finally, we\u2019ll assess the collapse of Bankman-Fried\u2019s empire, examining the missing $8.8 billion at the heart of FTX\u2019s collapse and Lewis\u2019s reasons for thinking it may yet turn up. We\u2019ll also discuss alternative accounts of Bankman-Fried\u2019s actions at FTX and dive deeper into the nature of cryptocurrency. <\/p>\n\n\n\n Before discussing his cryptocurrency empire, we\u2019ll explore who Bankman-Fried is <\/em>in the first place. We\u2019ll begin with Lewis\u2019s portrayal of Bankman-Fried before he became a crypto mogul, explaining why he spent his entire life as a social outcast, why he joined the effective altruism movement, and how he stumbled onto massive success as a rookie trader on Wall Street.<\/p>\n\n\n\n According to Lewis, Bankman-Fried has been a social outcast throughout his life<\/strong>, largely because he doesn\u2019t understand\u2014or outright disregards\u2014social conventions that others deem important<\/strong>. We\u2019ll examine how Bankman-Fried navigates social settings and how that\u2019s left him chronically lonely.<\/p>\n\n\n\n Lewis says that Bankman-Fried has struggled with social norms<\/a> throughout his life, and this struggle continued even as he became one of the world\u2019s wealthiest and most powerful individuals. To illustrate, we\u2019ll look at three key examples: Bankman-Fried\u2019s difficulty producing facial expressions, his behavior during virtual meetings, and his lack of concern for his appearance.<\/p>\n\n\n\n Lewis first relates that, in one of his interviews, Bankman-Fried noted that he never understood the point of facial expressions growing up<\/strong>\u2014he told Lewis that he didn\u2019t understand why he was supposed to smile while listening to other people speak. In fact, Bankman-Fried even told Lewis that as a trader on Wall Street, he forced himself to fake facial expressions so that his coworkers would find him more likable.<\/p>\n\n\n\n Bankman-Fried also showed little regard for social norms when meeting with influential people online. According to his head of public relations, Natalie Tien, this was the norm: Whenever Bankman-Fried took a one-on-one meeting via Zoom, he would distract himself with video games the entire time<\/strong>. For example, during a Zoom meeting with Vogue editor Anna Wintour, he regularly minimized the Zoom tab to play video games, only returning to Zoom when Wintour asked him a question that required more concentration. <\/p>\n\n\n\n Finally, Bankman-Fried showed no concern for his appearance, almost exclusively wearing dirty t-shirts and cargo shorts<\/strong>. Lewis reports that, in one exception, Bankman-Fried decided to wear a suit for his meeting with Senate Minority Leader Mitch McConnell, but he neglected to clean it, leaving him with a disheveled, wrinkled suit to meet one of the US\u2019s most important politicians. <\/p>\n\n\n\n Lewis suggests that, because Bankman-Fried didn\u2019t adhere to social norms, he experienced chronic loneliness in childhood and adulthood. As a child, for instance, Bankman-Fried only had one friend, with whom he mostly played Magic: The Gathering<\/em>. Bankman-Fried\u2019s only brother, Gabe, reported that they weren\u2019t close as children\u2014he viewed Sam as more of a fellow tenant than a brother. Moreover, Bankman-Fried\u2019s loneliness as a child persisted into adulthood: Lewis notes that, in Bankman-Fried\u2019s private journal as an adult, he confessed feeling as if no one understood him or was interested in him.<\/p>\n\n\n\n Lewis writes that, although Bankman-Fried didn\u2019t adhere to social norms, he did adhere to the tenets of <\/strong>effective altruism<\/em><\/strong>, <\/strong>a philosophical and social movement that advocates living one\u2019s life in a way that maximizes net good for humanity. <\/p>\n\n\n\n According to Lewis, Bankman-Fried\u2019s commitment to effective altruism flowed from his upbringing as a utilitarian<\/em>\u2014someone who thinks that actions are morally right only if they create the maximum amount of net happiness for everyone. Lewis notes that Bankman-Fried\u2019s parents were utilitarians, and their beliefs clearly rubbed off on Bankman-Fried himself: He was actively participating in online utilitarian message boards at age 12.<\/p>\n\n\n\n So, when Oxford philosopher William MacAskill\u2014one of the architects of the effective altruism movement\u2014met Bankman-Fried during the latter\u2019s junior year at MIT, Bankman-Fried immediately bought into his arguments and decided to embrace effective altruism, thus dedicating his life to saving the most lives possible.<\/p>\n\n\n\n However, Lewis points out that, even within the effective altruism movement, there was no consensus on the single best career path<\/a> for effective altruists. For instance, he notes that while becoming a doctor and saving lives in rural countries would seem like an appealing option for effective altruists, you could potentially do more good by working in finance and earning enough to subsidize the careers of several <\/em>doctors in rural countries. As we\u2019ll soon see, Bankman-Fried decided to embrace this notion of earning to give <\/em>in particular.<\/p>\n\n\n\n Bankman-Fried\u2019s first experience of earning to give occurred on Wall Street, Lewis relates. At the same time Bankman-Fried became an effective altruist, he interned as a trader at the quantitative trading firm Jane Street Capital<\/strong>.<\/p>\n\n\n\n Lewis writes that Bankman-Fried was invited to interview with Jane Street Capital (along with two other firms) after submitting his resum\u00e9 on a whim at MIT\u2019s career fair. For his interview, the Jane Street traders had Bankman-Fried do nothing but play complex probability games (like variants of classical poker) with ever-changing rules. And, he excelled at them, demonstrating an intuitive understanding of how to play the games in a way that maximized his expected value<\/a>.<\/p>\n\n\n\n After graduating from MIT, Bankman-Fried accepted a full-time offer at Jane Street and worked there for three years. Lewis notes that Bankman-Fried was exceptional at his job: His superiors ranked him the best trader in his class, and at the end of his third year he was poised to earn a bonus of $1 million. Further, Bankman-Fried\u2019s superiors told him that in 10 years, he could expect to be earning, at minimum, $15 million per year.<\/p>\n\n\n\n Nonetheless, Lewis reports that Bankman-Fried was unsatisfied at Jane Street, even though he was donating nearly all of his salary to effective altruism causes<\/a>. According to Lewis, he realized it was unlikely that the position he\u2019d taken on a whim at Jane Street was maximizing<\/a> his value to the world, as effective altruism required. <\/p>\n\n\n\n Moreover, cryptocurrencies were booming in 2017, with a billion dollars of crypto traded daily, even though traditional trading firms like Jane Street wouldn\u2019t touch them. So, Bankman-Fried realized that he could likely earn (and thus give) substantially more\u2014by his estimation, potentially $1 million a day\u2014by trading in the inefficient crypto market. For this reason, Bankman-Fried left Jane Street in 2017 to start his own quantitative cryptocurrency trading firm: Alameda Research<\/a>.<\/p>\n\n\n\n The moment that Bankman-Fried left Jane Street Capital, his quest to build an empire began. We\u2019ll examine how Bankman-Fried quickly became one of the wealthiest individuals in the world, detailing his ascent to stardom through the growth of his two companies\u2014Alameda Research, a quantitative cryptocurrency trading firm, and FTX, an international cryptocurrency exchange. We\u2019ll also discuss what Bankman-Fried did with his newfound wealth as his influence grew not just in the US, but the world.<\/p>\n\n\n\n According to Lewis, Bankman-Fried\u2019s empire began with Alameda Research, the quantitative cryptocurrency trading firm that Bankman-Fried started upon leaving Jane Street Capital. As Lewis relates, Bankman-Fried grew Alameda Research from a small group of effective altruists to a firm generating upwards of a billion dollars in annual profit by 2020. <\/strong><\/p>\n\n\n\n Alameda\u2019s beginning wasn\u2019t seamless, however. Lewis writes that, although Bankman-Fried had convinced wealthier effective altruists to loan him $170 million, by February 2018, the trading system that he had implemented was losing half a million dollars daily<\/em>. Moreover, tensions started to mount with his employees\u2014a small group of 20 effective altruists\u2014as Bankman-Fried refused to take their concerns seriously, even playing video games during key one-on-one meetings with his team. These tensions culminated in April of 2018, when his entire management team and half his employees quit in protest. <\/p>\n\n\n\n Lewis reports that with nobody left to challenge him, Bankman-Fried made the bold decision to turn on Modelbot<\/em>, an automated trading program that exploited international cryptocurrency price disparities to earn quick profits. Modelbot might, for example, notice that Bitcoin was selling for $5,000 in the US and $5,100 in Taiwan, and automatically purchase it in the US and sell it in Taiwan to guarantee a profit. Ultimately, Modelbot was a massive success: Alameda made a profit of $30 million in 2018, even after the initial investors withdrew most of their funds when Bankman-Fried\u2019s entire management team quit. And, as Lewis relates, these profits grew larger over time, with Alameda making $100 million in 2019 and $1 billion in 2020.<\/p>\n\n\n\n Although Alameda Research eventually became wildly successful, as of 2018, Bankman-Fried didn\u2019t believe it was earning enough money for effective altruism\u2014of its $30 million profit that year, Alameda had to pay the majority to former investors, taxes, and severance packages, leaving only $1.5 million to donate to effective altruism causes. Lewis writes that, consequently, Bankman-Fried decided to open FTX, an international cryptocurrency exchange, in April 2019 to earn even more money. <\/strong><\/p>\n\n\n\n Cryptocurrency exchanges, Lewis explains, provide a platform for purchasing and selling an array of cryptocurrencies for a small fee. They require an immense amount of trust in order for customers to deposit thousands (or even millions) of dollars on the platform. But, as Lewis points out, Bankman-Fried\u2019s personality didn\u2019t instill trust\u2014a social outcast who played video games during crucial meetings wasn\u2019t the person you wanted managing your money. For this reason, Bankman-Fried focused on two key aspects of FTX to develop consumer confidence: its technical superiority and its endorsement deals.<\/p>\n\n\n\n To prove that his new platform was reliable, Lewis says, Bankman-Fried created a cryptocurrency exchange that was technologically superior, especially when it came to futures<\/em>\u2014contracts that allow customers to make outsized bets on whether cryptocurrencies would rise or fall, using a smaller proportion as collateral<\/em>. For example, if one Bitcoin was trading at $20,000, you could pay $5,000 as collateral to enter into a futures contract with a seller that obligates you to purchase Bitcoin at $20,000 one month in the future. Then, if Bitcoin rose to $22,000, you would purchase it at $20,000 and immediately sell at $22,000 to net a $2,000 profit (in addition to retaining your collateral). By contrast, if Bitcoin dropped to $16,000, the $4,000 loss would be taken out of your collateral.<\/p>\n\n\n\n Before FTX, cryptocurrency exchanges were often liable for losses that exceeded their customers\u2019 collaterals. Returning to the previous example, if Bitcoin dropped from $20,000 to $13,000, your $5,000 collateral wouldn\u2019t be able to cover the loss. Thus, these losses were often socialized<\/em>, meaning they were taken out of other customers\u2019 accounts. However, Bankman-Fried\u2019s FTX cofounder, coding expert Gary Wang, designed a new system that instantly liquidated losses that outstripped customers\u2019 collateral, which avoided socialized losses. Thus, FTX instantly became more attractive than other exchanges without that feature.<\/p>\n\n\n\n Lewis writes that Bankman-Fried also sought to generate customer trust through endorsement deals with celebrities whose personalities were more magnetic than his own. For example, he paid Tom Brady $55 million for 20 hours of his time, in addition to paying Steph Curry $31.5 million and Shark Tank entrepreneur Kevin O\u2019Leary nearly $16 million. Bankman-Fried understood that these figures would be more appealing to his target audience\u2014younger men\u2014than he could ever hope to be. <\/p>\n\n\n\n Thus, as Lewis relates, Bankman-Fried managed to develop another company that was on a similar scale to Alameda Research\u2014in both 2020 and 2021, FTX earned over a billion dollars annually in revenue, becoming the world\u2019s second-largest cryptocurrency exchange in the process. In 2021, Bankman-Fried even raised $2.3 billion from venture capitalists in exchange for a 6% stake in FTX, suggesting that FTX was then worth around $40 billion.<\/p>\n\n\n\n Although FTX became the cornerstone of Bankman-Fried\u2019s cryptocurrency empire, Lewis argues that FTX nonetheless suffered from a nonexistent organizational structure. <\/strong>Lewis reports that, according to FTX\u2019s company psychiatrist George Lerner, Bankman-Fried notoriously hated organization charts, refusing to assign anyone in FTX formal titles\u2014even as the company ballooned to over 300 employees. <\/p>\n\n\n\n Lerner thus attempted to develop an organizational chart himself, which to date is the only organizational chart of FTX. He found that, despite its financial success<\/a>, the company was structurally in disarray: It had no chief financial officer, no chief risk officer, and nobody working in human resources. And, as we\u2019ll soon see, this total lack of structure made it difficult for any of FTX\u2019s employees to see the concrete reasons behind its later collapse. <\/p>\n\n\n\n Having built his empire, Bankman-Fried quickly became one of the world\u2019s wealthiest individuals\u2014Lewis reports that, in November 2021, Forbes estimated Bankman-Fried was worth $22.5 billion, making him the 60th wealthiest person on Earth. Lewis writes that Bankman-Fried had three primary uses for his wealth, all of which were ultimately geared toward effective altruism: Lobbying politicians to further his business interests, donating money to mitigate existential threats<\/a>, and minimizing the influence of Donald Trump. <\/strong><\/p>\n\n\n\nOverview of Going Infinite: The Rise and Fall of a New Tycoon<\/h2>\n\n\n\n
Who Is Sam Bankman-Fried?<\/strong><\/h3>\n\n\n\n
The Social Outcast<\/strong><\/h4>\n\n\n\n
Bankman-Fried\u2019s Disregard for Social Norms<\/h5>\n\n\n\n
Bankman-Fried\u2019s Loneliness in Childhood and Adulthood<\/h5>\n\n\n\n
The Effective Altruist <\/strong><\/h4>\n\n\n\n
The Successful Wall Street Trader<\/strong><\/h4>\n\n\n\n
The Rise of Bankman-Fried\u2019s Empire<\/strong><\/h3>\n\n\n\n
The Development and Rise of Alameda Research<\/strong><\/h4>\n\n\n\n
The Development and Rise of FTX<\/strong><\/h4>\n\n\n\n
FTX\u2019s Technological Superiority<\/h5>\n\n\n\n
FTX\u2019s Endorsement Deals<\/h5>\n\n\n\n
FTX\u2019s Lack of Organizational Structure<\/h5>\n\n\n\n
Bankman-Fried\u2019s Uses for His Newfound Wealth<\/strong><\/h4>\n\n\n\n
Use #1: Promoting His Business Interests<\/h5>\n\n\n\n