Brief summary

Going Infinite by Michael Lewis is a book that delves into the world of finance and explores the concept of infinite leverage, showcasing the risks and rewards of this powerful investment strategy.

Table of Contents

What’s in it for me? Learn the story of the rise and fall of Sam Bankman-Fried.

In this miniBlink we’ll take a quick overview of one of the bigger scandals in recent times: that of Sam Bankman-Fried, and the epic financial disaster that occurred when his international cryptocurrency trading company FTX went bankrupt. Written before the start of his trial, it isn’t able to provide any information on the criminal case that ensued, but it does highlight the chaos and confusion that surrounded his organization leading up to its bankruptcy.

The unknowable man finds his calling

How much do you know about Sam Bankman-Fried? Or, better yet, how much does anyone know about Sam Bankman-Fried? It turns out, even friends, family, and people who grew up with him find him hard to describe. As his brother put it, he keeps to himself.

What we do know is that he was raised by two parents who were both career academics. As he grew up, it was clear that he didn’t fit the conventional mold. He preferred being around adults and often questioned societal norms. He didn’t understand why anyone believed in Santa Claus or religious concepts like heaven and hell. He also had trouble connecting with people. He had to practice making facial expressions in order to make others more comfortable.

As a teenager, Bankman-Fried had better luck at math camp, where he got to indulge in his love for puzzles and games. He also met other kids his age who were drawn to utilitarianism, the philosophy that argues that the right decisions in life can be logically quantified. Just ask yourself, which actions will result in outcomes that do the most good to the most people?

Fortunes turned again in college, where, at a job fair, he encountered the financial trading firm Jane Street Capital. The interview process involved games with shifting rules that required quick decisions. He loved it. His time on Wall Street also found his utilitarian beliefs merging with the concept of effective altruism. It gave his life a purpose. Making loads of money made sense, because it meant you could give back, invest in the right causes, and make a real difference in the world.

At Jane Street Capital, Bankman-Fried learned how to make money. His salary for his second year was $600,000 and he stood to make a million-dollar bonus in his third year. But was this enough? He’d come to understand trading on a deep level. As he saw it, there was no reason he couldn’t come up with a better trading firm on his own.

Launching Alameda and FTX

Bankman-Fried took his million dollar bonus from Jane Street Capital and quit the firm. He had a hunch about cryptocurrency, a new digital currency that started out as a niche trading commodity yet was turning into a semi-serious financial market. The big draw was that crypto existed as entirely separate from other financial markets. It was a new frontier. The year was 2017 and the value of all crypto was booming, having gone from $15 billion to $760 billion.

After leaving Jane Street Capital, he started Alameda Research, a trading company specializing in cryptocurrency. He then moved to Hong Kong, where the crypto scene was really taking off, and created the first crypto futures exchange, called FTX. Alameda Research would provide the technology and the existing exchanges within the Asian markets would supply the customer trust.

It all comes crashing down

The beginning of the end can be traced to two reports in late 2022, one by Bloomberg, and another by CoinDesk. Both questioned the relationship between Alameda Research and FTX. CoinDesk pointed out that it seemed like over a third of Alameda’s assets, which totaled around $14.6 billion, were FTT tokens. At first, this didn’t seem like catastrophic news, but it soon became apparent to everyone in Bankman-Fried’s orbit that something was amiss. Everyone knew he was spending like crazy. He’d purchased dozens of smaller companies over the past couple years and was spending vast amounts of money on investments in other companies. Whether he was spending his own money, or money from Alameda or FTX – it was hard for anyone to tell. This, along with the possible illegal transfer of assets between FTX and Alameda, was about to send the precarious house of cards tumbling down.

The news struck a nerve, and in a matter of days, $200 million a day was fleeing the exchange. As the crisis deepened, the price of FTT token plummeted from $22 to a mere $7. Quickly, Sam was scrambling to try and cover $5 billion in customer withdrawals. But the money just wasn’t there.