Jeff Hirsh Read: October 2023
Inspiration: Followed the FTX saga in the news closely and wanted to understand the full context and story
Summary
Written with the help of ChatGPT, below is a brief summary to understand what is covered in the book.
“Going Infinite”, published in 2023 by journalist and author Michael Lewis, tells the story of Sam Bankman-Fried, the world’s youngest billionaire and crypto’s Gatsby. CEOs, celebrities, and leaders of small countries all vied for his time and cash after he catapulted, practically overnight, onto the Forbes billionaire list. Who was this rumpled guy in cargo shorts and limp white socks, whose eyes twitched across Zoom meetings as he played video games on the side? In Going Infinite, Lewis sets out to answer this question, taking readers into the mind of Bankman-Fried, whose rise and fall offers an education in high-frequency trading, cryptocurrencies, philanthropy, bankruptcy, and the justice system. Both psychological portrait and financial roller-coaster ride, Going Infinite is Michael Lewis at the top of his game, tracing the mind-bending trajectory of a character who never liked the rules and was allowed to live by his own—until it all came undone.
Unedited Notes
Direct from my original book log, below are my unedited notes (abbreviations and misspellings included) to show how I take notes as I read.
Sam Bankman Fried’s rise came out of nowhere, 2017 was worth nothing and barely knew bitcoin himself, May 2021 was his first media appearance on Bloomberg (would often play video games while on air), SBF never interested really in wealth/women, wanted “infinite money” to solve world’s biggest issues, moved FTX from HK to Bahamas and even spoke with Bahamas PM 2021 about paying off all $9bn debt so could build infra to host a crypto exchange empire, Sam’s parents were both Stanford law professors but similar to Sam, had no real interest in normal conventions like birthdays, religious holidays, etc which shaped Sam as a kid, Sam as a kid always confused by norms of children whether it be Santa or God, was removed from normal childhood, no friends in his childhood who knew him well—not even his own brother Gabe, SBF in college interviewed with trading firms like Jane Street, Wolverine, Jane Street interview process was puzzles that test how you think and adjust in real time to make decisions quickly with no true right answers but some wrong ways to approach—Sam stunned interviewers on these tests and opened his eyes to what he was good at and precisely how he thought, 2013 Sam was Jane Street intern and Sam thrived on its culture of gambling but socially struggled with coworkers, full time at Jane 2014, new era of trading automation favor those like Sam vs prior personality types and money at Citadel, Jane, etc was immense, Jane Street profited on ETF which 20x in volume ’99 to 2014 (Jane founded ’99 with a few traders to 200+ by ’14), bite sized piece of each ETF txn—made sure price of pieces inside ETF sum to ETF, would get calls to buy big sums of ETF and Jane/Sam had to quote a price quickly, Virtu and Citadel profited on speed vs Jane a little diff and more on “brain”/risk decisions, Citadel had connections to stock exchanges so move faster than others, Jane Street traders conduct research hypotheses to find trades, Sam led trade around 2016 election—markets moved at speed of CNN vs. had data at Jane to know minutes/seconds ahead, knew result and had 300mm win then flipped as market changed reaction to Trump and 300mm loss (one of Jane’s biggest single day losses), firdt really learned about crypto 2017 and left Jane soon after, saw opportunity in a market that never closed with exponential growth, started Alameda Research in 2017 to do what Jane did but in crypto, got $170mm from “effective altruism”—group of people who used $ to eventually do good, Caroline Ellison met Sam at Jane and joined Alameda 2018, both look at work from expected value POV, Alameda lost $500k or more per day at start, terrible and no controls, Sam did what he wanted, early months did make some money then turned early 2018 as Caroline joined, exploited inefficencies across various global exchanges that retail crypto traders didn’t pay attention to, big arbitrage in south korea vs US exchanges, 2018 Sam lost $4mm of Ripple (had no idea where it went) but didn’t want to tell investor b/c viewed as probability could appear, Sam viewed by mgmt team as reckless and tried to buy him out but owned 100%, April 2018 all mgmt team left Sam with 1-2mm in severance, investors in Alameda stayed but reduced $ from 170mm to 40mm, crypto tanking as well and Sam’s trades losing a lot, seemed to not care, Nov 2018 to Hong Kong and met with the power players of crypto for the first time, early 2019 had made 30mm profit on 40mm but needed lots more money (only 1.5 left after costs to give away to charities as EA), however SBF rep in the EA circle was in bad shape, SBF went to CZ who was CEO of Binance to get funding for Alameda to develop and exchange (had brilliant coder Gary) for crypto futures, futures exchange not a spot exchange and FTX would solve issue of “socialized losses” that plagued exchanges via second-by-second monitoring of losses and liquidating, CZ said no but had his own team get to work, CZ was polar opposite personality, Sam continued and hatched plan to hire other roles he couldn’t do well to get attention, and decided FTT coin was means of funding FTX (essentially was stock, and 1/3 of profits go to buy back annually), July 2019 FTT minted to public at $1 and spike 50%, made tons for original investors, then CZ offer $80mm for 20% of FTX, domiciled in Antigua and operate in HK given US rules were nonexistent/chaotic, late ’20 and early ’21 raised 2.3bn for 6% of company, FTX was profitable too and didn’t need $ but wanted VC credibility (got 150 new investors but 0 new board members, mainly as had no board and SBF refuse and governance say), had been in HK for 1.5 years and by summer 2021 wanted to go elsewhere as had concerns of crackdown, landed on Bahamas and spur of the moment left and didnt come back (like when landed at HK), Bahamas was open to crypto, good internet, notably had missed on insurance industry wave to Bermuda so eager to embrace crypto, 2021 bought 15% of all Solana and rose 1000x to value SBF stake at 12bn, FTT back up from $3 to $80 and FTX doing 1bn in rev, by end of 2021 Sam had target for FTX to be extremely licensed in as many countries (opposite of CZ/Binance), wanted to be regulated, Sam offer FTX lawyers to US gvt to create rules to regulate FTX, Binance still owned 20% of FTX but hate each other and approach opposite ways, SBF assert Binance faking its trading activity, Coinbase boring to Sam and insulted regulators, Sam saw Binance as poorly manipulating with bots so took adv and profited at FTX off Binance bad bots which angered CZ who didn’t fully grasp what had happened, mid-2021 CZ ask for 2.2bn for his original stake of 80mm and SBF pay 2.275bn in the end, Sam got into politics 2022–focused on climate change, pandemic prevention and anti-Trump, even communicated and pondered offering Trumo $5bn to not run again, Sam tried to swing congress seats to his interests, effective altriusm was always Sam’s focus—gave away 30mm then 300mm then aim for 1bn ’21-’23, gave away money rapidly to expedite action and impact, always was an expected value calc, June ’22 Three Arrows Capital blew up (second largest hedge fund after Alameda), FTX bought crypto banks Voyager and BlockFi for 200mm (previously worth 7bn), Nov 11 2022 FTX file for bankruptcy, 8bn supposed to be in FTX had gone to Alameda, all abandon Bahamas HQ, just before this Sam was looking to set up new HQ2 in dubai and had dust up with CZ, Nov 6 CZ sell 500mm in FTX stake he had leftover vis FTT, nov 1-5 200mm in FTX deposits fled and then nov 6 2bn then 4bn, Caroline Ellison offered $22 FTT price to CZ in tweet and this spooked market and price tank to $7, pre-crisis FTX had 15bn of assets and then 5bn withdrawn but did not actually have the other 10bn, FTX never had a US bank account until late ’21 so essentially customer funds went to Alameda bank account 8.8bn and Caroline/Alameda behaved as if was Alameda’s trading capital, Alameda originally help make markets on FTX and integral to scale so risk rules didn’t apply as to other trading funds for that reason but abused as went on, baffling that traders thought were doing so well until the very end (ex Jane Street trades so not dumb), basically $6-8bn unaccounted for, had ~3bn on hand and SBF admit 1bn lost to theft/hackers, John Ray became CEO or FTX in bankruptcy and look to unravel but basically lost in a web couldn’t truly comprehend, tried to clawback money but requires determine when FTX went insolvent which was impossible to trace, also various shitcoin type holdings like Serum which give view company was always solvent at market trading prices though not actually able to sell such large quantities, but by June ’23 John Ray had clawed back 7.3bn of a roughly 8.6bn hole, hadn’t clawed back Anthropic stake or CZ 2.275bn, theoretically by end of ’21 could have easily gotten crypto banks to lend $20bn+ and move deposits back to FTX, Sam insist on going to trial despite all others close plead guilty, was odd incentives situation since Gary, Caroline, Nishad all hold FTX equity not Alameda so were not helped by moving deposits to Alameda (only SBF helped as owned Alameda)
