The 2023 book entitled: “Going Infinite… ” by Michael Lewis is a story of how an infamous crypto entrepreneur, named Sam Bankman-Fried became a billionaire before subsequently being imprisoned for fraud in November 2023. This is another excellent Lewis book well worth purchasing and reading. Without boring the reader with the details of crypto currencies including Bitcoin, the author explains the background of these electronic coins and their initial goal of avoiding control by governments. The reality requires trust in individuals, computers and passwords with little to no or uncertain and changing regulation. In this environment, one unique individual with a personality and analytical skill was in a position to establish and trade cryptocurrencies. Lewis writes how Sam Bankman-Fried was able to exploit this environment both by issuing cryptocurrency and establishing an exchange to trade currencies. With the assistance of a skilled programmer (Gary) he establishes a high speed international exchange called FTX where he is able to earn a modest gain or fee on each transaction while avoiding loss being “socialized” to the owners and members of the exchange. As it turns out, several risks remained including loss of passwords, attack from hackers and runs on exchanges which have become essentially unregulated banks.
With great distain for “adult supervision” such as a Chief Financial Officer(CFO), who is never named nor appointed, Lewis writes: “There’s a functional religion around the CFO,” said Sam. “I’ll ask them, ‘Why do I need one?’ Some people cannot articulate a single thing the CFO is supposed to do. They’ll say ‘keep track of the money,’ or ‘make projections.’ I’m like, What the [expletive] do you think I do all day? You think I don’t know how much money we have?”” and Lewis goes on to write: “A board of directors, for instance. “It’s unclear if we even have to have an actual board of directors,” said Sam, “but we get suspicious glances if we don’t have one, so we have something with three people on it.” When he said this to me… he admitted he couldn’t recall the names of the other two people.” And Lewis writes: ““We tried having some grown-ups, but they didn’t do anything,” he said. “This was true for everyone over the age of forty-five. All they did was worry… The truth was that grown-ups bored him. All they did was slow him down.”
Lewis writes: “I first heard about Sam Bankman-Fried at the end of 2021 from a friend… Sam was only twenty-nine years old, a bit odd, and had spent most of the previous three years outside the United States… A few weeks later, Sam was on my front porch in Berkeley, California. He’d emerged from an Uber in cargo shorts, a T-shirt, limp white socks and ratty New Balance sneakers—which I soon learned were basically the only clothes he owned… The stuff he was telling me—all of which, I should say here, turned out to be true—was incredible. The sums of money in his life, for a start. Not just the tens of billions of dollars he’d accumulated in the previous two years but the hundreds of millions being thrown at him by leading Silicon Valley venture capitalists… I asked him how much it would take for him to sell FTX and go do something other than make money... “One hundred and fifty billion dollars,” he finally said—[but] added that he had use for “infinity dollars.”… because he planned to address the biggest existential risks to life on earth: nuclear war, pandemics… artificial intelligence that turned on mankind… and so on… A few months before I met him… Sam had moved his entire company from Hong Kong to the Bahamas…”
Lewis writes: “Most of the people who went to work for Sam Bankman-Fried ended up in jobs for which they were not obviously qualified, and Natalie Tien was no exception… in 2018, at the age of twenty-eight, she’d discovered crypto… The previous year, the price of bitcoin had risen almost twentyfold, from $ 1,000 to $ 19,000,… Natalie… spent a month reading everything she could find about cryptocurrencies and blockchains. “Everyone called it a scam,” she said, and she worried about that. Once on the inside, she was struck by how few of the people who worked in crypto could explain what a bitcoin was… her feeling that crypto might be the next big thing. “I thought of it as a gamble with nothing to lose,” she said… FTX hired her quickly, after a single interview, and she became the company’s forty-ninth employee. FTX was different from the other exchanges, mainly because the guy who ran it, Sam Bankman-Fried, was different… anyone at FTX who tried to live a normal life simply didn’t stick… The mania for crypto recalled Rotterdam circa 1637, when a single tulip bulb traded for roughly triple the price of a Rembrandt… People who tried to describe Sam’s hair would give up… It was just a mess, and like everything about Sam’s appearance felt less like a decision than a decision not to make a decision.”
Lewis writes: “Inside of three years, it appeared, Sam Bankman-Fried had created a business so valuable that his share of it implied that he was now the richest person in the world under the age of thirty… In addition to the crypto exchange, FTX, Sam also owned and controlled a crypto quant trading firm called Alameda Research. The year before, 2020, with just a handful of employees, Alameda had generated a billion dollars in trading profits, and was accumulating stakes in other companies, and crypto tokens, at a bewildering rate… In November 2021, Forbes listed his net worth at $ 22.5 billion, a notch below Rupert Murdoch”
Lewis writes: “By the end of 2021… Natalie alone, knew where Sam was at any given moment, and where he might next go, and how to get him to do what he needed to do… He had more trouble with sleep than anyone she’d ever known. At two in the morning, she might find him at his desk talking to some journalist halfway around the world… She put nothing on Sam’s schedule that he had not agreed to. More often than not, it was Sam who had suggested some meeting or public appearance. And yet Sam treated everything on his schedule as optional. The schedule was less a plan than a theory… Sam’s mind was a dial, with zero on one end and one hundred [percent] on the other. All he had done, when he said yes, was to assign some non-zero probability to the proposed use of his time. The… dial would swing wildly as he calculated and recalculated the expected value of each commitment, right up until the moment he honored it or didn’t… “Yup,” he’d always say. “Yup” was Sam’s go-to word, and the less he’d actually listened to whatever you’d just said, the longer he drew it out… Yuuuuuuuuup. “He’s not direct, most of the time,” said Natalie. “He’ll say ‘yup’ or ‘that’s interesting’ and he doesn’t really mean that”
Lewis writes: “Approximately zero of MIT’s physics majors became physicists anymore. “… a lot of physics majors go to work on Wall Street… He [Sam interviewed] with Jane Street traders… They didn’t ask him about what he was studying, or how he’d spent his summer vacations… their questions were mostly just mental math… “By the end of the day it was clear that it was by far the best I’d ever done at anything,” he said. Jane Street offered him a summer internship.”
Lewis writes: “[Sam was strongly influenced by] MacAskill [who] belonged to a small group… that had embraced ideas hatched long ago by… Peter Singer [who] was at least partly responsible for the ideas Sam had about what to do with his life… [In] 1971, when Singer was himself a twenty-five-year-old lecturer [he wrote] an essay, called “Famine, Affluence, and Morality,”… “I was trying to think of an example when it would be wrong not to help even though you are in no way responsible for the problem,” he said… we needed to give what we had to others until the cost to ourselves outweighed the benefits to them. We needed to stop thinking of charity as a thing that was nice to do but okay not to do, and begin to think of it as our duty... His essay… launched a thousand rebuttals… Beneath much of the criticism was the that Singer was making it too difficult for ordinary affluent people to live a moral life… ordinary affluent people simply ignored Singer… in 2009… The argument that MacAskill put to Sam… [was]: you… will spend roughly eighty thousand hours of your life working… judge the effectiveness of [your life] by counting the number of lives… saved during those eighty thousand hours… maximize the number… the choice… Put bluntly: Should you do good, or make money and pay other people to do good?... Earn to give, MacAskill called his idea.” [Sam fully bought into this invitation]
Lewis writes: “By 2014, when Sam started as a full-time trader at Jane Street Capital… The sums of money made by the people who ran these places were orders of magnitude greater than what the people who ran the big investment banks had ever made… Jane Street had installed him on what was then the firm’s most profitable desk, the one that traded international ETFs… Trading an ETF was like trading a ham and cheese sandwich…. If you know the price of a slice of ham, a slice of cheese, and a slice of bread, you know what the price of the sandwich should be: the sum of the ingredients. If the cost of the ingredients exceeded the price of the sandwich, you bought the sandwich and sold the ingredients. If the price of the sandwich exceeded the cost of the ingredients, you bought the ingredients and sold the sandwich… The firm paid him $ 300,000 after his first year, $ 600,000 after his second year, and, after his third year, when he was twenty-five years old, were about to hand him a bonus of $ 1 million…”
Lewis writes: “Sam was not happy… Sam… long ago already decided that a person should judge his life by its consequences… he should maximize the number of lives he saved. Sam had bought in… instantly. “It was very fast and matter of fact,” said Sam… Three years into his career at Jane Street, he remained fully committed to generating as many dollars as possible and channeling them into the causes that saved lives most efficiently. He’d given away most of the money he’d made on the trading floor to three charities… In 2017… the value of all crypto boomed, going from $ 15 billion to $ 760 billion. Jane Street didn’t trade crypto… Yet each day roughly a billion dollars’ worth of crypto traded… Sam [calculated]… he could make a million dollars a day or more…[believing] ‘I could make a billion dollars.’”
Lewis writes: “I show up at their apartment,” recalled Nishad. “It’s just Sam and Gary and Tara. They show me this thing. Sam was like, Watch me make these trades. He makes a few clicks and says, I just made forty thousand dollars… By the end of December… generated several million dollars in profits. In January 2018 their profits rose to half a million dollars each day… By December 2017, retail speculators in South Korea were driving bitcoin to prices 20 percent higher than they were on US exchanges,”… Anyone who could find a way to sell crypto in South Korea and at the same time buy it outside of South Korea could lock in vast profits. It wasn’t trivial to do… you needed to be South Korean. “We found a… friend… and traded in his name,”
Lewis writes: “they settled on Ripple. RippleNet was a platform created by some crypto entrepreneurs back in 2012 that was making a pitch to play the useful role in everyday financial life that Bitcoin had been meant to play… one day in February, someone—not Sam, who was frantically trading—noticed the missing Ripple. Four million dollars’ worth of it had vanished… Sam… stopped trading for two weeks. The other members of the management team confirmed that millions of dollars’ worth of Ripple was indeed missing… The missing Ripple was the final straw… on April 9, 2018, his entire management team, along with half of his employees, walked out the door… The investors had no real idea whom or what to believe... Now they had to decide: Was Sam a reckless, phony effective altruist who was going to steal or lose all their money…? ... With no one left to argue with him, Sam… turned… [the automated app, Modelbot] on and it instantly started making us lots of money,” said Nishad. And then they finally found the $ 4 million worth of missing Ripple… They were a small team who had endured an alarming drama and now trusted Sam. He’d been right all along!”
Lewis writes: “Alameda Research had righted itself and was consistently profitable… Sam had left for what was meant to be a brief trip to Hong Kong.
he called the fifteen or so people still working for him in downtown Berkeley to say he wasn’t coming back... As it turned out, the people who set out to eliminate financial intermediaries simply created some new ones of their own, including, by early 2019, two hundred fifty-four crypto exchanges… The whole thing was odd: these people joined together by their fear of trust erected a parallel financial system that required more trust from its users than did the traditional financial system… Crypto exchanges fell prey to hackers… In traditional finance, founded on principles of trust, no one really had to trust anyone. In crypto finance, founded on a principle of mistrust, people trusted total strangers with vast sums of money… In 2018, Alameda Research had generated $ 30 million in profits… The idea of creating a crypto exchange was at once obvious… The founders of the world’s half-dozen or so biggest crypto exchanges were all likely already billionaires… On a futures exchange, traders put up as collateral only a fraction of the bets they made… If a trade went bad fast, it could wipe out the collateral and leave the exchange on the hook for losses… [Whereas]… FTX… monitored customers’ positions not by the day but by the second. The instant any customer’s trade went into the red, it was liquidated… The new exchange’s losses would never need to be socialized, because the exchange would never have losses.”
Lewis writes: “To create a crypto exchange, Sam needed… money… What he had was a token…. The FTX token was called FTT. The most important feature of FTT was that its holders were collectively entitled to roughly a third of the annual revenues of the FTX exchange. Of the $ 1 billion in revenues the exchange generated in 2021, for example, $ 333 million would be set aside to “buy back and burn” FTT… One hitch to the tokens was that they were illegal to sell inside the United States. The explosion of new crypto tokens had spawned a new game of cat and mouse, between token creators and securities regulators… At any rate, the buyers of the FTT would either be foreigners, or Americans living outside the country… Out of thin air FTX minted three hundred fifty million FTT tokens”
Lewis writes: “The Hong Kong regulators gave a crypto exchange cover to do pretty much whatever it wanted to do but changed the rules often enough to keep it interesting… FTX had existed for just a bit more than a year. In the final six months of 2019, it had generated about $ 10 million in revenues. In 2020, the number was going to jump to somewhere between $ 80 million and $ 100 million.”
Lewis writes: “Some countries, like Hong Kong, offered a license for a spot crypto exchange and agreed to turn a blind eye to futures trading. Most countries, like the United States, offered no license at all… Bitcoin was defined early on, in 2015, as a commodity, and so is regulated by the CFTC. FTT—or for that matter a leveraged Bitcoin token—would likely be defined as a security and so fall under the jurisdiction of the SEC… “It’s a game of twenty questions with the regulators, but if you ask the wrong question, you get fined,” explained Sam.”
Lewis writes: “FTX had gone from nothing to the world’s fifth-biggest crypto exchange, and every day, it was seizing market share from its competitors… In the end, between the summer of 2020 and the spring of 2021, in four rounds of fundraising, they sold roughly 6 percent of the company for $ 2.3 billion. Roughly one hundred fifty different venture capital firms invested. All of them caved to Sam’s refusal to give them a seat on the board (he had no board) … Crypto world had created what were, in effect, unregulated new banks… It was never clear where Alameda Research stopped and FTX started… Sam sort of ran both and neither.”
Lewis writes: “Sam hopped on a plane to the Bahamas and never returned.
Sam felt he’d be better off staying in the Bahamas than returning to Hong Kong.
The Chinese government’s habit of arresting the heads of any crypto exchanges they could get their hands on and arbitrarily freezing their funds put everyone at FTX on edge… The Bahamas was putting the finishing touches on new crypto regulations… The Bahamas had great internet, piped in by undersea cable from Florida.”
Lewis writes: ““I watched it in wonder,” said Sam… In the past eighteen months, FTT’s price had risen from roughly $ 3 to roughly $ 80. Again, it was hard to say how much Sam could unload FTT for, had he tried to sell his stake all at once… FTX…
was now the world’s fastest-growing crypto exchange, and the casino of choice for big professional traders. In less than three years, it had gone from 0 to 10 percent of all crypto trading. In 2021, it would generate $ 1 billion in revenues.”
Lewis writes: “when someone from the Miami Heat reached out to them to suggest that FTX buy their naming rights, for $ 155 million for the next nineteen years, Sam leapt at the chance… Once their name was on an American stadium, no one turned down their money… in the mind of the American consumer, FTX became better and better known, and Sam Bankman-Fried became more and more famous.”
Lewis writes: “Back in 2015… Christina Rolle took over the job of chief financial regulator: executive director of the Securities Commission of The Bahamas… She set out to… write the rules to legalize much of crypto finance… in the late summer of 2021, the founder of the world’s hottest crypto exchange had turned up and made Christina Rolle look like a genius… [But later, when] I landed [in the Bahamas], Friday, November 11, [2022,] the signs on the airport walls were still cheerily pitching crypto—even though at four thirty that morning, Sam had DocuSigned the papers that threw FTX into bankruptcy in the United States… Natalie… knew what everyone now did: at least $ 8 billion belonging to crypto traders, and meant to be safe and sound inside FTX, had wound up instead inside Alameda Research… Like most FTX employees, she’d kept her money on the exchange. Now it was all gone… The run on FTX was in its own way spectacular… By late Sunday night, the sixth, $ 100 million was leaving every hour. FTX customers withdrew $ 2 billion that day, and then tried to withdraw another $ 4 billion on Monday. By Tuesday morning, $ 5 billion had exited, and the exchange was clearly not going to be able… to come up with enough cash…”
Lewis writes: “On Friday, Nishad was gone… $ 450 million in crypto vanished from… FTX. No one knew who the hacker was; everyone just assumed it was an inside job… On Thursday she [Rolle] froze FTX’s assets and effectively threw the company into liquidation… At the moment of its collapse, FTX… owed $ 8.7 billion. Nearly half of those losses, or $ 4 billion, were concentrated in… fifty accounts…”
Lewis writes: “But on that evening, Sam filled in one piece of this particular puzzle: FTX had lost a lot of money to hackers… The size of those hacks was an exception, Sam said. All losses due to theft combined had come to just a bit more than $ 1 billion. In all cases, Gary had quietly fixed the problem and they’d all moved on and allowed the thieves to keep their loot… The hacks reduced to $ 5 billion the number of unexplained missing dollars. Sam was no help in reducing the number further.”
Just outside the scope of this book, Sam was apparently convicted of fraud; other details are unclear.
Going Infinite: The Rise and Fall of a New Tycoon
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Last update: 09-02-2024
Top reviews from the United States
G. C. Carter
How a crypto entrepreneur became a billionaire before being imprisoned; another excellent Lewis book
Reviewed in the United States on February 16, 2024CEH
Valuable insight on the FTX crypto disaster
Reviewed in the United States on November 4, 2023Mark Webster
Lewis has done it again!
Reviewed in the United States on June 1, 2024